COBS 2.4.3 COBS 2.4.3 "Service-based" Professional Clients(a) A Person is a "Service-based" Professional Client if:(i) the Regulated Activity carried on, where this involves provision of a service to a Client, is Providing Credit;(ii) the Person is an Undertaking;(iii) the Credit Facility in question is provided for use in the business activities of:(A) the Person;(B) a Controller of the Person;(C) any member of the Group to which the Person belongs; or(D) a joint venture of a Person referred to in Rules 2.4.3(a)(iii)(A)–(C);(iv) the Regulated Activity carried on, where this involves provision of a service to a Client, is "Advising on Investments", "Advising on Credit", "Arranging Credit" or "Arranging Deals in Investments" and the service is provided for the purposes of Corporate Structuring and Financing; and(v) the Person has not opted-in to be classified as a Retail Client.(b) A "Service-based" Professional Client may elect to be treated as a Retail Client in accordance with Rule 2.6.1.(c) An Authorised Person must have a reasonable basis for classifying a Person as falling within the list of "Service-based" Professional Clients above such as inspecting copies of any necessary supporting documentation and keeping records of the same.
Guidance1. An Authorised Person may classify an Undertaking as a Professional Client for the purposes of Providing Credit for business purposes, not only for the Undertaking itself, but also for its related entities (such as a Controller or member of its Group), provided that the Undertaking has not opted-in to be classified as a Retail Client.2. An Authorised Person must decide whether to classify an Undertaking, that is a "deemed" Professional Client but would also qualify as a "Service-based" Professional Client, as a "deemed" Professional Client or as a "Service-based" Professional Client. "Deemed" Professional Clients are not able to opt to be classified as a Retail Client, but "Service-based" Professional Clients are. Generally, it would be more appropriate to classify such a Person as a "deemed" Professional Client rather than a "Service" based" Professional Client.3. Joint ventures may be in the form of contractual arrangements under which parties contribute their assets and expertise to develop or to undertake specified business activities. Where an Undertaking is set up by participants in such a joint venture for the purposes of their joint venture, the Undertaking itself can be treated as a Professional Client provided a joint venture partner meets the Professional Client criteria. To be able to rely on a joint venture partner's Professional Client status, such a partner should generally be a key decision maker with respect to the business activities of the joint venture, and not just a silent partner.4. Advisory and arranging services given to an individual who is a wealth management client for the purposes of their investment activities or portfolio management are excluded because such clients are not necessarily Professional Clients. Therefore, for such a client to qualify as a Professional Client, he would need to be an "assessed" Professional Client.