FINAL NOTICE

TAKE NOTICE: The Financial Services Authority of 25 The North Colonnade, Canary
Wharf, London E14 5HS (“the FSA”) gives final notice about the imposition of a
financial penalty:


1.
PENALTY

1.1
The FSA gave Perspective Financial Management Limited (“PFM”) a Decision

Notice on 18 January 2011 which notified PRM that pursuant to section 206 of the

Financial Services and Markets Act 2000 (the “Act”), the FSA had decided to impose

a financial penalty of £49,000 on PFM. This penalty is in respect of breaches of

Principles 3, 7 and 9 of the FSA’s Principles for Businesses (“the Principles”), during

the period between 6 April 2006 and 30 April 2008 (“the relevant period”).

1.2
PFM has agreed that it will not be referring the matter to the Upper Tribunal (Tax and

Chancery Chamber).

1.3
Accordingly, for the reasons set out below, the FSA imposes a financial penalty in the

amount of £49,000.

1.4
PFM agreed to settle at an early stage of the FSA's investigation and therefore

qualified for a 30% (Stage 1) discount under the FSA's executive settlement

procedures. Were it not for this discount, the FSA would have imposed a financial

penalty of £70, 000 on PFM.

2.
REASONS FOR THE PENALTY

2.1
The FSA has imposed a financial penalty on the basis of the facts and matters

described in more detail in section 4, below. These failings relate to advice given by

PFM to customers during the relevant period to transfer their existing pension

arrangements into a personal pension plan (“PPP”) or self invested personal pension

(”SIPP”).

2.2
PFM failed to take reasonable care to ensure the suitability of its advice, in breach of

Principle 9. This gave rise to a risk of unsuitable advice being given. In a number of

individual cases, transacted during the relevant period, that were looked at by the

FSA, there was evidence of unsuitable advice being given to customers. Specifically,

(1)
gave unsuitable advice to its customers to transfer their existing pension

arrangement into PPPs or SIPPs;

(2)
promoted and subsequently advised 14 customers to invest pension funds, via a

SIPP, in an unregulated collective investment scheme (“UCIS”) without

ensuring that those customers fell within the relevant exemptions to the general

restriction on the promotion of UCIS, contained within section 238 of the Act,

exposing these customers to the risk of being sold investments that may not

have been suitable for their needs. It appears to the FSA following a review of

four of these customers’ files and following interviews with directors and

employees of PFM that these customers did not fall within one of the

exemptions which would have permitted the Firm to promote the UCIS directly

to them;

(3)
failed to take into account the customers’ needs and circumstances when

making recommendations; and

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(4)
failed to obtain, record and retain sufficient information about its customers’

needs and circumstances to support its assessment of suitability.

2.3
PFM failed to pay due regard to the information needs of its clients, and communicate

information to clients in a way which was clear, fair and not misleading, in breach of

Principle 7. Specifically, documentation regarding pension switching produced by

PFM and disclosed to clients contained insufficient and/or unclear information. This

prevented clients from making informed decisions about the recommendations being

made by PFM.

2.4
PFM failed to take reasonable care to organise and control its affairs responsibly and

effectively, with adequate risk management systems, in breach of Principle 3.

(1)
PFM failed to monitor adequately the quality of advice being given by its

advisers to customers to switch from one pension arrangement to another and

did not take steps to update its compliance monitoring arrangements in spite of

recommendations received from PFM’s internal compliance manager (“the

compliance manager”) and from an external compliance consultant engaged

by PFM (“the external consultant”); and

(2)
PFM did not put in place any system or procedure which would ensure that it

only recommended investments in a UCIS to those customers who fell within

the relevant exemptions.

2.5
The FSA regards these failings as particularly serious because:

(1)
pension switches require careful consideration of a customer’s attitude to risk,

of the benefits being given up and, as a pension is a long term investment, the

long term impact of charges. Customers who are not advised properly can

suffer substantial financial losses, which may not become apparent until the

customer retires;

(2)
PFM employed the external consultant to conduct quarterly file reviews. The

external consultant expressed a number of concerns which included concerns

about the quality of pension switching advice provided by PFM’s advisers.

However, PFM failed to address these issues.

2.6
PFM was acquired by Perspective Financial Group Limited (“the Group”) in April

2008. All the misconduct referred to in this Notice took place prior to the Group’s

2.7
The FSA considers that the failings identified have been mitigated to a considerable

extent by PFM’s decision to make significant changes to its organisational,

governance and compliance arrangements. This programme of change began

following PFM’s acquisition by the Group in April 2008 and was accelerated

following an FSA visit to PFM in June 2008. The changes include carrying out pre-

submission checks on all pension transfer cases and UCIS cases, weekly management

information being provided to PFM’s senior management and enhanced key

performance indicators for individual advisers. In addition, PFM has not conducted

any UCIS business since 2008.

3.
RELEVANT STATUTORY AND REGULATORY PROVISIONS

3.1
The relevant statutory provisions and regulatory requirements are set out at Annex A

to this Final Notice.

4.
FACTS AND MATTERS RELIED ON

Background

4.1
On 6 April 2006 (“A-Day”), the Government introduced changes to simplify the tax

rules for personal and occupational pensions in the UK. In particular, limits to the

amount that could be paid into a personal pension were removed, although restrictions

on the amount of tax-free cash that could be taken from personal pensions remained.

Additionally, from A-Day, alternatives to drawing a pension as an annuity become

available. Following these changes many advisers reviewed their clients’ existing

pension arrangements. These reviews led to a significant increase in advice given to

customers to transfer their existing pension arrangements into PPPs or SIPPs.

4.2
In light of the significant increase in pension switches the FSA become concerned that

consumers may have been switched into pension products which carried high charges

and had features or additional flexibility that customers did not need. The FSA was

5

also concerned about whether firms’ management oversight and compliance

monitoring of this type of advice were robust enough to detect and prevent unsuitable

advice and ensure fair outcomes for customers.

4.3
In the summer of 2008, the FSA commenced Phase 1 of a thematic review of pension

switching advice, looking at pension switches made since A-Day. For the purposes of

the FSA thematic review a pension switch was defined as advice to switch from any

occupational or individual pension scheme to an individual PPP or SIPP.

4.4
In December 2008, the FSA published a report on the findings of Phase 1 of the

thematic review. The report noted that the FSA had visited 30 firms and assessed 500

customer files. A quarter of the firms visited were assessed as providing unsuitable

advice in a third or more of the cases sampled. Overall, unsuitable advice was found

in 16% of cases reviewed.

4.5
In February 2009, the FSA published guidance on assessing the suitability of pension

switches, setting out the standards the FSA expects in relation to pension switches and

the action firms should take to ensure that customers receive suitable advice.

4.6
The FSA wrote to over 4,500 firms to summarise its findings, to ask them to consider

past and future sales in light of the findings and to take remedial action where

necessary. The FSA then undertook a further programme of firm assessments in the

latter half of 2009 in Phase 2 of the thematic review.

The Firm

4.7
PFM is an IFA based in Milton Keyes and Wilmslow with approximately 20 advisers

and has been authorised and regulated by the FSA since 1 December 2001.

4.8
PFM has conducted 210 pension switches in the two years since A-Day and

approximately 30 of these have been into SIPPs.

Sales process

4.9
PFM identified pension switches as ‘high risk’ products and attempted to put in place

controls to mitigate the risk of customers receiving unsuitable advice. The

controls included risk rating advisers and pre-submission and post sale file checking.

However, the FSA identified a number of procedural failings which were:

(1)
the pre-submission and post sale checks did not assess overall suitability of

advice;

(2)
the pre-submission checks failed to identify that the cost comparisons were

inaccurate and suitability letters were misleading;

(3)
the pre-submission checks identified a number of procedural failings in

relation to specific advisers yet despite this the individuals advisers were

‘signed off’ as competent; and

(4)
although management information was collected, it was not effectively

monitored or acted upon by senior management.

CONDUCT IN ISSUE

Suitability of advice

4.10
The FSA reviewed nine client files where advice was given by PFM on pension

switches and a further four files where advice was given by PFM to invest in a UCIS.

4.11
Deficiencies in the steps taken by PFM to ensure the suitability of its pension

switching advice were found in around 75 % (nine files) of the 13 files reviewed (five

out of the nine pensions switching files reviewed and all of the four UCIS files

reviewed). In particular, PFM failed to:

(1)
obtain and/or record sufficient “know your client” (“KYC”) information to

establish its clients’ needs and objectives to demonstrate that the advice to

switch was suitable (COB 5.2.5R / COBS 9.2.2R);

(2)
ensure that sufficient information was recorded on fact finds about customers’

objectives (COB 5.2.5R / COBS 9.2.2R);

(3)
ensure that there was a process for assessing and recording customers’ attitude

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to risk in a consistent manner (COB 5.2.5R / COBS 9.2.2R); and

(4)
ensure that the customers who were recommended to invest in a UCIS fell

within the exemptions under COB 3.11.2 (which was the relevant part of the

FSA’s Handbook in force at the time that the UCIS was being promoted) or

The Financial Services and Markets Act 2000 (Promotion of Collective

Investments Schemes) (Exemptions) Order 2001 (SI 2001/1060). This exposed

customers to a risk of being given unsuitable investment advice.

4.12
PFM could not demonstrate that it had considered the needs and circumstances of

each customer prior to making a recommendation for the customer to switch their

pension because (COB 5.2.5R / COBS 9.2.2R):

(1)
details of the existing scheme were not adequately recorded and/ or obtained;

(2)
there was no evidence that alternative products had been discussed, including

considering whether alternative funds within the customer’s existing

scheme(s) may have been suitable;

(3)
illustrations and suitability reports did not reflect the actual charges of the

recommended product. Cost comparisons were provided for cash funds

whereas the customer had been recommended managed funds with higher

management charges. The costs of discretionary management services were

also excluded;

(4)
where the customers’ attitude to risk did not meet the product’s risk rating

there was no explanation why the recommendation was considered nonetheless

suitable; and

(5)
PFM failed to make and retain records of product research to demonstrate the

choice of the product and/or the product provider.

4.13
PFM’s failure to ensure the suitability of its pension switching advice gave rise to

unsuitable advice being given. In over 60 % (five cases) of the nine files reviewed the

FSA considered there to be evidence that unsuitable recommendations had been made

(COB 9.2.1R(2)). A summary of the client files where the FSA found evidence of

unsuitable sales is set out in Annex B. In summary:

(1)
recommendations to switch pension arrangements were made where the new

product was almost identical to the existing scheme and the customer incurred

costs associated with the switch which were unnecessary; and

(2)
the recommendation to switch exposed customers to a higher level of risk than

they had stated that they were prepared to take.

Communications with clients

4.14
PFM failed to communicate its recommendations to customers in a way which was

clear, fair and not misleading.

4.15
The file reviews highlighted that PFM’s suitability reports did not explain adequately

the reasons for, or the suitability of, recommendations for its customers. Specifically,

PFM’s suitability reports (COB 1.9R / COBS 2.2.1R (1)):

(1)
did not reflect its customers’ individual circumstances. Suitability reports

contained standard generic phrases rather than being tailored specifically to

each customer;

(3)
failed to explain why PFM had concluded that the recommended pension

switch was suitable for the particular customer, having regard to the

customer’s personal and financial circumstances;

(3)
did not contain details of the ceding scheme, as a result customers could not

compare the cost of the new scheme with the ceding scheme on a like for like

basis;

(4)
contained insufficient information on the cost of extra services (such as

discretionary fund management) for clients to be able to make an informed

decision on whether they were happy to pay for the additional charges on the

recommended product; and

(5)
provided inadequate information about alternative advice or products, for

example the possibility of remaining in an existing scheme but changing funds

was not discussed with customers.

Systems and controls

4.16
PFM failed to put in place adequate systems and controls to mitigate the risk of

customers receiving potentially unsuitable advice. The facts and matters referred to

above at paragraphs 4.12 and 4.13 are repeated, particularly PFM’s failures to ensure

that there was a process in place for assessing and recording customers’ attitude to

risk in a consistent manner and failure to make and retain records of product research

to demonstrate why a particular product and/or product provider had been selected.

4.17
PFM employed the external consultant to conduct quarterly file reviews. The external

consultant reviewed a minimum of 10% of each adviser’s business. Amongst the files

reviewed were a number containing advice given by PFM to customers to make

pension switches. PFM received a series of reports (“the reports”) from the external

consultant between 14 July 2006 and 11 April 2007. The reports highlighted the

following significant concerns with pension switching:

(1)
generally the risk profile used in suitability reports contradicted the risk profile

used in the fact find. The external consultant advised PFM to adopt a

standardised approach to risk profiling its customers; and

(2)
the quality of advice being given by three advisers (“the advisers”).

4.18
Despite the fact that the external consultant had expressed concern about the quality

of advice being given by the advisers, two of the advisers were subsequently signed

off as competent by PFM and in 2007 and 2008 these advisers were appointed as

supervisors of other more junior staff at PFM.

5.
ANALYSIS OF BREACHES

5.1
For the reasons set out in paragraphs 4.10 to 4.18 above, the FSA has concluded that

PFM failed to take reasonable care to ensure the suitability of its advice, in breach of

Principle 9. Specifically, PFM failed to obtain, record and retain sufficient

information about its customers’ needs and circumstances to support its assessment of

suitability, failed to ensure that its customers were provided with sufficient

information to enable them to make properly informed decisions and failed to monitor

adequately the quality of advice being given by its advisers. These defects caused

unsuitable advice to be given in some instances as PFM advised its customers to

transfer their existing pension arrangements into PPPs or SIPPs, without taking into

account the individual needs and circumstances of customers.

5.2
By reason of the facts and matters referred to in paragraph 4.14 to 4.15 above, the

FSA has concluded that PFM has failed to pay due regard to the information needs of

its clients, and communicate information to its clients in a way which is clear, fair and

not misleading, in breach of Principle 7. Specifically, suitability reports issued by

PFM did not contain enough information or contained confusing and/or contradictory

information which made it difficult for clients to make informed decisions.

5.3
By reason of the facts and matters referred to in paragraphs 4.16 to 4.18 above, the

FSA has concluded that PFM failed to take reasonable care to organise and control its

affairs responsibly and effectively, in breach of Principle 3. Specifically, PFM had

been put on notice by the external consultant that there were problems in the way it

had classified its customers’ attitude to risk and in relation to the quality of advice

being given and, despite having a mechanism in place for such matters to be escalated

to its senior management, PFM did not address these issues.

6.0
ANALYSIS OF SANCTION

6.1
The FSA’s policy on the imposition of financial penalties is set out in Chapter 6 of the

Decision Procedures and Penalties Manual (“DEPP”) which forms part of the FSA

Handbook. When determining the appropriate level of financial penalty the FSA has

also had regard to Chapter 13 of the Enforcement Manual (“ENF”), the part of the

FSA’s Handbook setting out the FSA’s policy on the imposition of financial penalties

which was in force until 27 August 2007 and to Chapter 7 of the Enforcement Guide

(“EG”), in force thereafter.

6.2
The principal purpose of imposing a financial penalty is to promote high standards of

regulatory conduct by deterring persons who have committed breaches from

committing further breaches, helping to deter other persons from committing similar

breaches and demonstrating generally the benefits of compliant behaviour.

6.3
In determining whether a financial penalty is appropriate the FSA is required to

consider all the relevant circumstances of a case. Applying the criteria set out in

DEPP 6.2.1 (regarding whether or not to take action for a financial penalty or public

censure) and 6.4.2 (regarding whether to impose a financial penalty or a public

censure), the FSA considers that a financial penalty is an appropriate sanction, given

the serious nature of the breaches, the risks created for customers of PFM and the

need to send out a strong message of deterrence to other firms of the consequences of

recommending a course of action to its customers without demonstrating the

suitability of those recommendations.

6.4
DEPP 6.5.2 sets out a non-exhaustive list of factors that may be of relevance in

determining the level of a financial penalty. The FSA considers that the following

factors are particularly relevant in this case.

Deterrence: DEPP 6.5.2G(1)

6.5
A financial penalty would deter PFM from committing further breaches. Equally,

other authorised firms will be encouraged to improve their systems and controls in

relation to the advice process; this in turn promotes the message to the industry that

the FSA expects firms to maintain high standards of regulatory conduct. The fine will

reinforce the message that the FSA expects firms to be able to evidence the suitability

of their advice to customers.

The nature, seriousness and impact of the breach: DEPP 6.5.2G(2)

6.6
The FSA has considered the nature and seriousness of the breaches that occurred

during the relevant period, including the nature of the requirements breached; the

number and duration of the breaches; the extent to which the breaches revealed

serious or systemic weaknesses in PFM’s management systems or internal controls;

and the loss or risk of loss caused to consumers.

The extent to which the breach was deliberate or reckless (DEPP 6.5.2(3))

6.7
Although the FSA found no evidence that the conduct in issue was deliberate, we

concluded that there was a significant risk to customers arising from the deficiencies

in the monitoring of the quality of advice by PFM’s advisers in respect of pension

switching recommendations during the relevant period and that this risk has

crystallised in a small number of cases where unsuitable advice has been given.

Other action taken by the FSA (or a previous regulator): DEPP 6.5.2(G(10)

6.8
In determining the appropriate sanction, the FSA took into account sanctions imposed

by the FSA on other firms for similar behaviour.

The size, financial resources and other circumstances of the firm: DEPP 6.5.2G(5)

6.9
The FSA had no evidence to suggest that that PFM cannot afford the proposed

penalty.

Conduct following the breach: DEPP 6.5.2G(8)

6.10 PFM has co-operated fully with the FSA’s investigation.

6.11
Following its acquisition by the Group PFM has made significant changes to its

organisational, governance and compliance arrangements.

6.12
Additionally on 3 December 2009, PFM appointed a skilled person (“the skilled

person”) under section 166 of the Act to review 41 higher risk pension switches, to

assess whether the advice given was unsuitable, whether the unsuitable advice caused

the customer any loss and the extent of that loss and to identify any changes that

needed to be made to systems and controls to prevent similar issues arising in the

future.

Disciplinary record and compliance history: DEPP 6.5.2G(9)

6.13
PFM has not been the subject of previous disciplinary action by the FSA.

7.
DECISION MAKERS

7.1
The decision which gave rise to the obligation to give this notice was made by the

Settlement Decision Makers.

8.
IMPORTANT

8.1
This Final Notice is given to PFM in accordance with section 390 of the Act.

Manner of and time for Payment

8.2
The financial penalty must be paid in full by PFM to the FSA by no later than 7

February 2011, 14 days from the date of the Final Notice.

If the financial penalty if not paid

8.3
If all or any of the financial penalty is outstanding on 7 February 2011, the FSA may

recover the outstanding amount as a debt owed by PFM to the FSA and due to the

8.4
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of information

about the matter to which this notice relates. Under those provisions, the FSA must

publish such information about the matter to which this notice relates as the FSA

considers appropriate. The information may be published in such manner as the FSA

considers appropriate. However, the FSA may not publish information if such

publication would, in the opinion of the FSA, be unfair to PFM or prejudicial to the

interests of consumers.

8.5
The FSA intends to publish such information about the matter to which this Final

Notice relates as it considers appropriate.

FSA contacts

8.6
For more information concerning this matter generally, PFM should contact Mario

Theodosiou (direct line: 020 7066 5914/ fax 020 7066 5915) of the Enforcement and

Financial Crime Division of the FSA.

Tom Spender
Head of Department
FSA, Enforcement and Financial Crime Division

Annex A

STATUTORY PROVISIONS, REGULATORY GUIDANCE AND POLICY

1.
Introduction

1.1.
The FSA's statutory objectives, set out in section 2(2) of the Act, are: market

confidence; public awareness; the protection of consumers; and the reduction of

financial crime.

1.2.
The FSA has the power, pursuant to section 206 of the Act, to impose a financial

penalty of such amount as it considers appropriate where the FSA considers an

authorised person has contravened a requirement by or under the Act.

Principles for Businesses

1.3.
The Principles are a general statement of the fundamental obligations of firms under

the regulatory system and reflect the FSA’s regulatory objectives. They derive their

authority from the FSA’s rule-making powers as set out in the Act and reflect the

FSA’s regulatory objectives. The relevant Principles breached are as follows:

(1)
Principle 9 (Customers: relationships of trust): A firm must take reasonable

care to ensure the suitability of its advice and discretionary decisions for

customer who is entitled to rely upon its judgment;

(2)
Principle 7 (Communications with clients): A firm must pay due regard to the

information needs of its clients, and communicate information to them in a

way which is clear, fair and not misleading; and

(3)
Principle 3 (Management and control): A firm must take reasonable care to

organise and control its affairs responsibly and effectively, with adequate risk

management systems.

1.4.
The FSA’s approach to taking disciplinary action is set out in Chapter 2 of EG. In

deciding to take the proposed action the FSA has also had regard to the appropriate

provisions of ENF which was in force until 27 August 2007 and therefore during

part of the relevant period. Imposing financial penalties and public censures shows

that the FSA is upholding regulatory standards and helps to maintain market

confidence, promote public awareness of regulatory standards and deter financial

crime. An increased public awareness of regulatory standards also contributes to the

protection of consumers.

1.5.
The FSA’s policy on the imposition of financial penalties is set out in chapter 6 of

DEPP (which came into force on 28 August 2007) which is a module of the FSA's

Handbook of rules and guidance (and, previously, ENF). The principal purpose of

imposing a financial penalty is to promote high standards of regulatory conduct by

deterring persons who have committed breaches from committing further breaches,

helping to deter other persons from committing similar breaches and demonstrating

generally the benefits of compliant behaviour (DEPP 6.1.2G and previously ENF

13.1.2).

1.6.
The FSA will consider the full circumstances of each case when determining

whether or not to take action for a financial penalty. DEPP 6.2.1G (and previously

ENF 12.3.3) sets out guidance on a non-exhaustive list of factors that may be of

relevance in determining whether to take action for a financial penalty, which

include the following:

(a)
DEPP 6.2.1G(1) and previously EG 12.3.3(2): The nature, seriousness

and impact of the suspected breach;

(b)
DEPP 6.2.1G(2) and previously 12.3.3(3): The conduct of the person

after the breach;

(c)
DEPP 6.2.1G(3) and previously ENF 12.3.3(4): The previous

disciplinary record and compliance history of the person;

(d)
DEPP 6.2.1G(4): FSA guidance and other published materials; and

(e)
DEPP 6.2.1G(5) and previously ENF 12.3.3(5): Action taken by the

FSA in previous similar cases.

1.7.
The FSA will consider all the relevant circumstances of a case when it determines

the level of financial penalty. DEPP 6.5.2G sets out guidance on a non-exhaustive

list of factors that may be of relevance when determining the amount of a financial

penalty, which include:

(a)
DEPP 6.5.2G(1): Deterrence;

(b)
DEPP 6.5.2G(2) and previously ENF 13.3.3(1): The nature, seriousness

and impact of the breach in question;

(c) DEPP 6.5.2G(5) and previously ENF 13.3.3(3): The size, financial

resources and other circumstances of the person on whom the penalty is

to be imposed;

(d)
DEPP 6.5.2G(8) and previously ENF 13.3.3(5): Conduct following the

breach;

(e)
DEPP 6.5.2G(9) and previously ENF 13.3.3(6): Disciplinary record and

compliance history; and

(f)
DEPP 6.5.2.G(10) and previously ENF 13.3.3(7): Other action taken by

the FSA.

Conduct of Business Rules

In force until 31 October 2007

1.8.
COB 5.2.5R requires that before a firm gives a personal recommendation concerning

a designated investment to a private customer, it must take reasonable steps to

ensure that it is in possession of sufficient personal and financial information about

that customer relevant to the services that the firm has agreed to provide; and

1.9.
COB 5.4.3R requires that a firm must not, amongst other things, make a personal

recommendation of a transaction to a private customer unless it has taken reasonable

steps to ensure that the private customer understands the nature of the risks involved.

1.10.
COB 3.11.2R and COB 3.11.3 G allows a firm to communicate an invitation or

inducement to participate in an unregulated collective investment scheme if either;

(a)
the communication falls within COB 3 Annex 5 R or;

(b)
the communication is exempt from the scheme promotion restriction

under the Financial Services and Markets Act 200 (Promotion of

Collective Investment Schemes) (Exemptions) Order 2001.

In force from 1 November 2007

1.11.
COBS 2.2.1R (1) provides that a firm must provide appropriate information to a

client about the firm and its services and also about costs and associated charges, so

that the client is reasonably able to understand the nature and risks offered so that the

client is able to take investment decisions on an informed basis.

1.12
COBS 9.2.1R (2) requires that a firm must take reasonable steps to ensure that a

personal recommendation, or a decision to trade, is suitable for its client.

1.13
COBS 9.2.2 R requires that;

(1)
a firm must obtain from the client such information as is necessary for the firm

to understand the essential facts about him and have a reasonable basis for

believing, giving due consideration to the nature and extent of the service

provided, that the specific transaction to be recommended, or entered into in

the course of managing:

(a)
meets his investment objectives;

(b)
is such that he is able financially to bear any related investment risks

consistent with his investment objectives; and

(c)
is such that he has the necessary experience and knowledge in order to

understand the risks involved in the transaction or in the management

of his portfolio.

(2)
The information regarding the investment objectives of a client must include,

where relevant, information on the length of time for which he wishes to hold

the investment, his preferences regarding risk taking, his risk profile, and the

purposes of the investment.

(3)
The information regarding the financial situation of a client must include,

where relevant, information on the source and extent of his regular income, his

assets, including liquid assets, investments and real property, and his regular

financial commitments