COBS — definition for UK financial services

COBS (Conduct of Business Sourcebook)

COBS is the FCA Handbook sourcebook governing how investment firms conduct designated investment business with clients. It implements the UK's onshored MiFID conduct requirements and covers client categorisation, suitability and appropriateness, disclosure, inducements, best execution and communications with clients.

The Conduct of Business Sourcebook (COBS) is the FCA Handbook sourcebook that governs how firms carry on designated investment business with clients. It is the principal conduct rulebook for investment advisers, discretionary managers, brokers and fund managers, and it implements the conduct requirements derived from the UK’s onshored Markets in Financial Instruments Directive (MiFID II) regime. COBS sits within the Business Standards block of the Handbook and works alongside the Principles for Businesses and, since 2023, the Consumer Duty.

What COBS requires

COBS covers the full client lifecycle. Firms must categorise clients as retail, professional or eligible counterparties (COBS 3), with retail clients receiving the highest protection. Financial promotions and client communications must be fair, clear and not misleading (COBS 4). Firms must disclose information about themselves, their services and costs (COBS 6). Where a firm advises or manages investments, it must assess suitability (COBS 9 and 9A); for non-advised dealing in complex products, it must assess appropriateness (COBS 10 and 10A). COBS 11 governs dealing and managing, including the obligation to take all sufficient steps to obtain best execution.

Inducements and research

COBS 2.3 and 2.3A restrict the inducements a firm may pay or receive and govern how research is paid for, reflecting the MiFID II unbundling rules. These provisions are designed to ensure firms act honestly, fairly and professionally in their clients’ best interests.

Who it applies to and why it matters

COBS applies to firms conducting designated investment business and, for some provisions, to insurers. Because COBS breaches frequently underpin FCA enforcement and redress cases, investment firms must train front-office and support staff on the specific chapters relevant to their activities and keep pace with amendments as the FCA refines the onshored MiFID framework.

FCA Handbook, CASS and Consumer Duty.

Frequently asked questions

What does COBS cover?

The Conduct of Business Sourcebook (COBS) sets the conduct rules for designated investment business. Key areas include client categorisation (COBS 3), communicating with clients and financial promotions (COBS 4), information about the firm and its services (COBS 6), suitability for advised and discretionary services (COBS 9 and 9A), appropriateness for non-advised services (COBS 10 and 10A), dealing and managing including best execution (COBS 11), and inducements and research (COBS 2.3).

Which firms must comply with COBS?

COBS applies to firms carrying on designated investment business (investment advisers, discretionary and portfolio managers, brokers, fund managers and similar investment firms), as well as long-term insurers in respect of certain business. The detailed application of each chapter depends on the activity and the client type, with enhanced protections for retail clients compared with professional clients and eligible counterparties.

What is the difference between suitability and appropriateness under COBS?

Suitability (COBS 9 and 9A) applies where a firm gives a personal recommendation or manages investments: the firm must ensure the transaction meets the client's investment objectives, financial situation and knowledge. Appropriateness (COBS 10 and 10A) applies to non-advised services in complex products: the firm need only assess whether the client has the knowledge and experience to understand the risks, and may warn the client if it does not.