6.2. Client order handling
6.2.1. Application
The Rules in COB 6.2 do not apply to an Authorised Firm with respect to any transaction which:
- (a) it undertakes with a Market Counterparty; or
- (b) it carries out for the purposes of managing a Fund of which it is the Fund Manager.
6.2.2. General requirement
An Authorised Firm that executes orders on behalf of Clients must ensure that it has in place procedures that provide for the prompt, fair and expeditious execution of orders for a Client, relative to orders for itself or for other Clients.
6.2.3. General obligation in relation to orders for a Client
An Authorised Firm must satisfy the following conditions when executing orders for a Client:
- (a) orders executed for Clients must be promptly and accurately recorded and allocated;
- (b) comparable orders for Clients must be executed sequentially and promptly unless the characteristics of the order or prevailing market conditions make this impracticable, or the interests of the Client require otherwise;
- (c) a Retail Client must be informed of any material difficulty relevant to the proper execution of orders promptly when the Authorised Firm becomes aware of the difficulty; and
- (d) make and maintain a record of:
(i) the date and time of the allocation;
(ii) the relevant Investments;
(iii) the identity of each Client concerned; and
(iv) the amount allocated to each Client and to the Authorised Firm recorded against the intended allocation as required by (a).
6.2.4. Aggregation of orders
An Authorised Firm may aggregate an order for a Client with an order for other Clients or with an order for its own account only where:
- (a) it is unlikely that the aggregation will operate to the disadvantage of any Client whose orders have been aggregated;
- (b) the Authorised Firm has disclosed in writing to the Client that his order may be aggregated and that the effect of the aggregation may be to his disadvantage;
- (c) the Authorised Firm has made a record of the intended basis of allocation and the identity of each Client before the order is effected; and
- (d) the Authorised Firm has in place written standards and policies on aggregation and allocation which are consistently applied and should include the policy that will be adopted when only part of the aggregated order has been filled.
6.2.5. Allocation of Investments
Where an Authorised Firm has aggregated a Client order with an order for other Clients or with an order for its own account, and part or all of the aggregated order has been filled, it must:
- (a) promptly allocate the Investments concerned;
- (b) allocate the Investments in accordance with the stated intention; and
- (c) ensure the allocation is done fairly and uniformly by not giving undue preference to itself or to any of those for whom it dealt
6.2.6. Churning
An Authorised Firm must not execute a transaction for a Client in its discretion or advise any Client to transact with a frequency or in amounts to the extent that those transactions might be deemed to be excessive. The onus will be on the Authorised Firm to ensure that such Transactions were fair and reasonable at the time they were entered into.
6.2.7. Timely execution
Once an Authorised Firm has agreed or decided to enter into a transaction for a Client, it must do so as soon as reasonably practical. An Authorised Firm may postpone the execution of a transaction if it has taken reasonable steps to ensure that it is in the best interests of the Client.
6.2.8. Averaging of prices
An Authorised Firm may execute a series of transactions on behalf of a Client within the same trading day or within such other period as may be agreed in writing by the Client, to achieve one investment decision or objective, or to meet transactions which it has aggregated. If the Authorised Firm does so, it may determine a uniform price for the transactions executed during the period, calculated as the weighted average of the various prices of the transactions in the series.
6.2.9. Records of orders and transactions
When an Authorised Firm: