3.1.1. Requirements for communications

Pursuant to section 3.2.1. of the COB an Authorised Firm must ensure that:

(a)     any communication with a Client in relation to a Financial Product or Financial Service; or

(b)     any Financial Promotion that it communicates or approves,

is fair, clear and not misleading.

A “communication” includes:

(a)     a Financial Promotion;

(b)     a client agreement;

(c)     terms of business;

(d)     Financial Product terms and conditions;

(e)     a mandate;

(f)       a power of attorney entered into for the purposes of a Financial Product or Financial Service; and

(g)     any other communication which relates in whole or in part to the provision of a Financial Product or Financial Service.

3.1.2. Financial Promotions

Pursuant to section 27 of the FSFR an unauthorised Person must not make a Financial Promotion in relation to a Regulated Activity or Market Activity.

There are three circumstances for making Financial Promotions pursuant to COB 3.3.1:

(1)   if they are made by Authorised Firms;

(2)   if their content was approved by an Authorised Firm; or

(3)   the communication is considered as Exempt Financial Promotion.

For the Purposes of COB 3.3.1. a person who makes Financial Promotion is called “Authorised Promoter”.

Any Authorised Firm must either have authorisation from the AFSA or fall within an exemption conferred by the AIFC Acts before it approves the content of a Financial Promotion.

Approval must be intended to allow unauthorised Firms to transmit Financial Promotions without breaching the restriction. Although the requirement is that approval relates to the content of communications, approval should relate specifically to that part of a communication which promotes an invitation or inducement as opposed to the whole communication.

Before Authorised Firms give their approval to unauthorised Firms, they need to make sure that promotions comply with the relevant conduct rules contained in COB (including the promotions to be fair, clear and not misleading).

Authorised Firms must not approve financial promotions if the promotions will be made in the course of a personal visit, telephone conversation or other interactive dialogue.

When an Authorised Firm approves a financial promotion, it must ensure that the promotion is fair, clear, and not misleading. If at a later stage they find out that promotions which they have approved no longer comply with the rules, they must withdraw their approval and notify anyone who is relying on it as soon as possible.

An Authorised Firm that communicates or approves a financial promotion must have put in place adequate systems and controls, or policies and procedures, to comply with COB.

In addition, a firm must ensure that information presented is accurate and always gives a fair and prominent indication of any relevant risks when referencing any potential benefits.

The following key elements must be considered to determine whether there is a Financial Promotion:

(a)     is there an invitation or inducement?

(b)     has it been communicated?

(c)     is it made during the course of business?

(d)     is the purpose or effect of the communication that a person will engage in investment activity or any Regulated Activity?

Under the Financial Promotion regime, promotions can be real time or non-real time, and real time promotions are subdivided to solicited or unsolicited promotions.

Real time promotion

Real-time promotions are promotions made in the course of a personal visit, telephone conversation or other interactive dialogue. Scope for interaction is essential if a Financial Promotion is to be a real-time communication. For example, a telephone call is not the same thing as a telephone conversation. A call can be made by an intelligent automated machine asking questions, however, this is not an interactive dialogue any more than a questionnaire or electronic decision tree. Broadly speaking, a real-time communication is one which enables interaction at the time it is made.

Non-real time promotion

Non-real-time promotions are promotions which are not real-time communications. They include dialogues which take place by letter, email or in a publication. In this context a “publication” includes newspapers, journals, magazines or other periodical publications, websites or similar systems for the electronic display of information, television or radio programmes and teletext services.

Meetings and presentations will be real-time communications, however slides, handouts and other visual aids made available during presentations and meetings will be non-real-time communications. Other communications which may exist in enduring form and which will be non-real-time communications include videos, audio cassettes, bulletin boards, websites and recorded telephone messages. Messages placed on internet chat-rooms will also be non-real-time communications.

Radio or television programmes or teletext services may contain communications that involve an interactive dialogue, for example, a communication made by the broadcaster and addressed to an interviewee studio guest, a member of the audience or a person who speaks to the broadcaster by telephone. However, these will always be non-real-time communications.

The Financial Promotion restriction is meant to catch the activities of people, rather than the media through which the activity in question is conducted, and is intended to be media-neutral. Internet publications are therefore treated in the same way as documents posted to specific recipients or published in newspapers as they are non-real time promotions.

Solicited real time promotion

A solicited real-time financial promotion is a communication made in the course of a personal visit, telephone conversation or other interactive dialogue which:

(a)   is initiated by the recipient, or

(b)   takes place in response to an express request from the recipient of the communication.

Real-time communications will only be solicited if it is clear from all the circumstances that they concern the kind of controlled activities or investments envisaged by the recipient at the time they initiate or request the communication. All the circumstances in which a call, visit or dialogue is requested or initiated need to be taken into account.

Unsolicited real time promotion

An unsolicited real-time promotion is the regulatory term for a cold call and it is defined as real-time communications which is not solicited.

More detailed definition, examples of and restrictions with regard to Unsolicited Real Time Financial Promotions are given in COB 3.4.

Promotion by crowdfunding platform

Pursuant to Rule 7.3.9 of the AIFC Authorised Market Institution Rules an Authorised Crowdfunding Platform must not advertise a specific lending or Investment proposal that is available on the Authorised Crowdfunding Platform. The Authorised Crowdfunding Platform must take reasonable steps to ensure that Borrowers or Issuers that use platform do not advertise the lending or Investment proposal, unless the advertisement is made on the platform and is accessible only to existing Clients who use the Authorised Crowdfunding Platform.

3.1.3. Exempt Financial Promotions

For the purposes of COB 3.3.1(c), a communication is an exempt Financial Promotion if it is:

(a)     directed at and capable of acceptance exclusively by a Person who is believed by the Person making the Financial Promotion, on reasonable grounds, to be a Professional Client or Market Counterparty;

(b)     made to a Person as a result of an unsolicited request by that Person to receive the Financial Promotion;

(c)     made or issued by or on behalf of a government or non-commercial government entity, (including a central bank);

(d)     made by a Person in the course of providing legal or accountancy services and may reasonably be regarded as incidental to and a necessary part of the provision of such services;

(e)     included in a Prospectus approved by the AFSA in accordance with MAR; or

(f)       included in any document required or permitted to be published under the Listing Rules.

A communication is exempt from the provisions related to Unsolicited Real Time Financial Promotions when it is an image advertising consisting of:

(a)     the name of the Authorised Promoter;

(b)     a logo or other image associated with the Authorised Promoter;

(c)     a contact point; and

(d)     a reference to the types of Financial Product or Financial Service provided by the Authorised Promoter, or to its fees.

3.1.4. Other exclusions from the Financial Promotions Prohibition

The requirements with regard to Financial Promotions do not apply to certain categories of Centre Participants:

(a)     a Representative Office;

(b)     a MTF Operator and an OTF Operator.

Provisions with regard to Unsolicited Real Time Financial Promotions do not apply to Market Counterparty Business.