PS20/4: Amendment of COBS 21.3 permitted link rules

Open consultation: CP18/40
Consultation closes

This Policy Statement (PS) sets out our response to the feedback received to our Consultation Paper CP18/40 Consultation on proposed amendment of COBS 21.3 permitted links rules in our Conduct of Business (COBS) sourcebook. It also sets out the final rules and guidance we are publishing following the consultation.

Read PS20/4 (PDF)

Why we are changing our rules

We are seeking to address any unjustified barriers to retail investors investing in a broader range of long-term assets in unit-linked funds, while maintaining an appropriate degree of investor protection.

They follow recommendations by the Law Commission and engagement with the Treasury’s Pension Scheme Investments Taskforce regarding potential regulatory barriers to investment in some less liquid or illiquid assets. This includes, for example, investment in infrastructure, loans secured on infrastructure assets and some less liquid securities.

Who this applies to

This PS will affect those who have an interest in investing in illiquid or higher risk assets via unit-linked funds. It will therefore be of interest to:

  • pension scheme operators and trustees
  • operators and investment managers of unit-linked funds
  • life assurance companies with exposure to illiquid assets such as property, either by direct investment or through holdings in investment funds
  • intermediaries, such as platform service providers, wealth managers or financial advisers, whose retail clients invest in funds holding illiquid assets
  • firms communicating to retail clients financial promotions relating to unit-linked funds making significant investments in illiquid assets (these firms will be subject to the requirement in COBS to include a risk warning)
  • investors who have direct or indirect investments in these funds
  • managers of other types of fund such as undertakings for collective investment in transferable securities (UCITS), qualified investor schemes (QIS) or unauthorised schemes which may be affected by our proposals
  • insurance and investment trade bodies

Next steps

We are publishing final rules with this Policy Statement. Firms wishing to make use of the new conditional permitted links will need to ensure compliance with these rules with effect from 4 March 2020.