UK

FCA Financial Promotions: Cold Calling and Overseas Element (COBS 4.8-4.9)

Cold Calling Restrictions and Overseas Element [COBS 4.8-4.9]

Rule: Firms are prohibited from cold calling retail clients about certain investments including securities, derivatives, and collective investment schemes. When making financial promotions with an “overseas element,” firms must not disguise the overseas nature or mislead about regulatory protections.

Overview

COBS 4.8-4.9 restrict:

  • Unsolicited real-time communications (cold calling) to retail about investments
  • Misleading overseas promotions that conceal foreign jurisdiction risks

Purpose: Protect consumers from:

  • High-pressure sales tactics via unsolicited calls
  • Confusion about where investments held and regulatory protections apply

COBS 4.8: Cold Calling

COBS 4.8.1R: General Prohibition

A firm must not make a real-time financial promotion to a retail client unless:

  1. Client has given prior consent to be contacted, OR
  2. Promotion relates to excluded product/service (not restricted), OR
  3. Other exemption applies (e.g., existing client relationship)

“Real-time financial promotion” means:

  • Personal visit (door-to-door)
  • Telephone call
  • Other interactive dialogue conducted in real-time

Does NOT include:

  • Pre-recorded messages
  • Emails
  • SMS/text messages
  • Social media posts or messages (unless real-time chat)

COBS 4.8.2R: Products Subject to Cold Calling Ban

Cannot cold call retail clients about:

Investment TypeCold Call Prohibited?
Readily realizable securities✅ YES - prohibited
Non-readily realizable securities✅ YES - prohibited
Derivatives✅ YES - prohibited
Warrants✅ YES - prohibited
Units in regulated collective investment schemes✅ YES - prohibited
Life policies✅ YES - prohibited
Pension transfers/opt-outs✅ YES - prohibited
Pension fund withdrawals✅ YES - prohibited
Structured deposits✅ YES - prohibited
Deposits❌ NO - cold calling allowed
General insurance (non-investment)❌ NO - cold calling allowed (subject to other rules)
Mortgages and home finance❌ NO - cold calling allowed (subject to other rules)

“Readily realizable security”:

  • Shares admitted to trading on regulated market (LSE, AIM)
  • Government and public securities
  • Debentures admitted to trading
  • Easily bought/sold on exchange

“Non-readily realizable security”:

  • Unlisted company shares
  • Private equity
  • Unquoted securities
  • Illiquid investments

Effect: Cannot cold call about stocks, bonds, funds, pensions, or derivatives to retail without prior consent.

COBS 4.8.3R: Exemption for Existing Clients

Cold calling ban does NOT apply if:

Condition 1: Client is an existing client of the firm, AND

Condition 2: Call relates to:

  • Investment of same broad type previously purchased by client, OR
  • Further transaction in existing holding, OR
  • Service already provided to client

“Existing client” means:

  • Current relationship
  • Past 12 months had services from firm
  • Not merely on mailing list

Example (allowed):

  • Calling existing ISA client about topping up ISA: ✅ YES
  • Calling client with stocks portfolio about another stock: ✅ YES
  • Calling client about switching funds in existing pension: ✅ YES

Example (not allowed):

  • Calling client with cash ISA about stocks & shares ISA: ❌ NO (different investment type)
  • Calling former client after 3 years gap: ❌ NO (not current relationship)
  • Calling prospect who requested brochure but never bought: ❌ NO (not existing client)

Cold calling ban does NOT apply if:

Client has given express prior consent:

  • To be contacted
  • About the type of investment
  • Via telephone or personal visit
  • For promotional purposes

Requirements for valid consent:

1. Express and informed

  • Clear statement of what consenting to
  • Cannot be buried in terms and conditions
  • Must be opt-in, not opt-out

2. Specific to investment type

  • “I consent to calls about investments” - sufficient
  • Cannot use consent for one product to call about unrelated product

3. Recorded and evidenced

  • Written consent (email, form, etc.)
  • Telephone consent recorded
  • Timestamp and details retained

4. Withdrawable

  • Client can withdraw consent anytime
  • Opt-out must be honored immediately
  • Cannot continue calling after withdrawal

Example forms of valid consent:

Website checkbox (opt-in):

☐ I would like to receive calls from [Firm] about investment opportunities and financial products.

Telephone consent:

“Thank you for your enquiry. May we contact you by telephone to discuss investment opportunities? If you agree, please say ‘yes’.” [Record consent]

Email confirmation:

“You have requested to receive promotional calls from [Firm]. To confirm, please click this link.”

Guidance on obtaining and managing consent:

Best practices:

  • Separate checkbox for telephone consent (not bundled)
  • Clear language about what calls will cover
  • Easy opt-out mechanism (e.g., “Reply STOP”)
  • Regular review of consent (annual reconfirmation)
  • Respect Do Not Call preferences

Records to maintain:

  • When consent obtained
  • How consent obtained (channel)
  • What consent covers (product types)
  • When consent withdrawn (if applicable)
  • Evidence (recording, email, form)

Consent is NOT transferable between firms.

Cannot:

  • Buy consent lists from third parties
  • Rely on consent given to another firm
  • Use affiliate’s consent for different firm

Must:

  • Obtain own consent from client
  • Clear that consent given to specific firm
  • Cannot share consent without explicit permission

Example:

  • Client consents to calls from Firm A
  • Firm A’s affiliate Firm B cannot call client
  • Client must give separate consent to Firm B

Criminal Penalties: Financial Services Act 2012

Cold calling in breach of COBS 4.8:

PenaltyDetails
Criminal offenseUnder Financial Services Act 2012, Schedule 3
Maximum sentence2 years imprisonment and/or unlimited fine
Applies toIndividuals making unlawful calls (not just firms)
FCA enforcementCan prosecute or refer to police

Why criminal?

  • Protect vulnerable consumers from high-pressure tactics
  • Deter boiler room scams
  • Financial promotions fraud often starts with cold call

Recent prosecutions:

  • Individuals jailed for cold calling about high-risk bonds
  • Boiler room operators prosecuted for unlicensed cold calling
  • Fines for authorized firms breaching cold calling rules

COBS 4.9: Promotions with Overseas Element

COBS 4.9.1R: Misleading Overseas Promotions Prohibited

A firm must not:

Disguise or conceal the fact that:

  • Investment is issued/managed by overseas person, OR
  • Obligations under investment are not enforceable in UK, OR
  • Regulatory protections do not apply

In particular, must not:

  • Describe investment as “UK-based” when held overseas
  • Imply FSCS protection applies when it does not
  • Suggest FCA regulation applies to overseas element
  • Conceal that disputes must be resolved in foreign jurisdiction

COBS 4.9.2R: Disclosure Requirements

If financial promotion relates to investment with overseas element:

Must disclose:

  1. Location of issuer/manager

    • Country where investment manager based
    • Country where fund domiciled
    • Country where custodian holds assets

  2. Regulatory status

    • Which regulator oversees investment (if any)
    • Statement if NOT regulated
    • Whether FCA authorization applies

  3. Compensation availability

    • Whether FSCS applies (usually does NOT for overseas investments)
    • Alternative compensation scheme (if any)
    • Statement if no compensation available

  4. Jurisdiction for disputes

    • Which country’s law governs contract
    • Where disputes must be resolved
    • Whether UK courts have jurisdiction

COBS 4.9.3G: Presentation of Overseas Information

Guidance on how to present overseas element:

Prominence: Disclosure must be:

  • Clear and prominent
  • Not hidden in small print
  • Given before client commits
  • Adequate time to consider implications

Language: Use clear terms: ✅ “This fund is not regulated by the FCA” ✅ “Your investment will be held in Switzerland” ✅ “FSCS protection does not apply to this investment” ✅ “Disputes are subject to Jersey law”

❌ “Regulatory framework differs” ❌ “Arrangements vary by jurisdiction” ❌ Technical jargon without explanation

Common Overseas Scenarios

Scenario 1: Offshore Fund

Facts:

  • Luxembourg UCITS fund
  • Promoted by UK authorized firm
  • Assets held in Luxembourg

Required disclosures:

This fund is domiciled in Luxembourg and regulated by the Commission
de Surveillance du Secteur Financier (CSSF). The fund is a UCITS and
can be marketed in the UK.

Your assets will be held in Luxembourg. While [UK Firm] is covered by
the Financial Services Compensation Scheme, the FSCS does not cover
losses from the fund itself. UCITS compensation arrangements may apply
under Luxembourg law.

The fund is governed by Luxembourg law. Disputes may be subject to
Luxembourg jurisdiction.

Scenario 2: US Stocks via UK Broker

Facts:

  • UK broker offering US stock trading
  • Stocks held in US custodian
  • UK firm FCA authorized

Required disclosures:

US stocks are traded on US exchanges and held in custody in the United
States. While [UK Firm] is covered by FSCS, your investments held
overseas are NOT covered by FSCS for investment losses. US custodian
may have separate insurance (SIPC).

Your holdings are subject to US law and regulations. [UK Firm] is FCA
authorized and regulated for the brokerage service.

Scenario 3: Offshore Bond (Isle of Man)

Facts:

  • Life insurance bond issued by Isle of Man insurer
  • Promoted by UK financial adviser
  • Adviser FCA authorized

Required disclosures:

This bond is issued by [Insurer Name], which is incorporated and
regulated in the Isle of Man by the Isle of Man Financial Services
Authority, NOT by the UK Financial Conduct Authority.

This product is NOT covered by the UK Financial Services Compensation
Scheme. The Isle of Man has its own compensation scheme which may
provide protection up to 90% of the claim value with no upper limit.
Further information: iomfsa.im

The bond is governed by Isle of Man law. In the event of a dispute,
Isle of Man courts will have jurisdiction.

Scenario 4: European Pension (QROPS)

Facts:

  • Qualifying Recognised Overseas Pension Scheme (QROPS)
  • Malta-based pension scheme
  • UK adviser arranging transfer

Required disclosures:

This is a Qualifying Recognised Overseas Pension Scheme (QROPS) based
in Malta. It is regulated by the Malta Financial Services Authority,
NOT the UK Financial Conduct Authority or The Pensions Regulator.

UK pension protections (Pension Protection Fund, Financial Services
Compensation Scheme, Pensions Ombudsman) do NOT apply to this overseas
pension.

Transferring to an overseas pension has tax implications and may affect
your entitlement to UK state benefits. You should take specialist tax
advice before proceeding.

The scheme is governed by Maltese law. Disputes are subject to Maltese
jurisdiction.

COBS 4.9.4R: Overseas Persons Promoting in UK

If overseas person (not UK authorized) promotes in UK:

Additional requirements:

  • Must be approved by UK authorized firm (Section 21)
  • UK firm takes responsibility for compliance
  • Must disclose overseas person’s status
  • Must provide UK contact point for complaints

Cannot mislead by:

  • Appearing to be UK-based firm
  • Using UK-sounding name without overseas disclosure
  • Omitting fact that firm not FCA authorized

COBS 4.9.5G: Brexit and EEA Passporting

Post-Brexit (as of January 1, 2021):

EEA firms can NO longer passport into UK.

Must either:

  • Obtain UK FCA authorization (become UK authorized), OR
  • Use UK appointed representative, OR
  • Qualify for overseas persons exemption (limited)

Existing EEA passported firms:

  • Lost automatic right to promote in UK
  • Must comply as overseas firms
  • Section 21 approval required from UK authorized firm

Disclosure implications:

  • EEA firms now “overseas” for UK purposes
  • Must disclose overseas status
  • FSCS does NOT apply (EEA compensation schemes only)
  • Subject to COBS 4.9 requirements

Practical Compliance

Cold Calling Compliance Checklist

Before making unsolicited call:

  • Is recipient a retail client?
  • Is call about restricted investment (securities, funds, derivatives, pensions)?
  • Do we have valid prior consent? (Check consent records)
  • Is client an existing client for this investment type?
  • If no consent/not existing client → DO NOT CALL

During call (if permitted):

  • Identify firm and caller name clearly
  • State purpose of call upfront
  • Provide opportunity for client to opt out
  • Do not use high-pressure tactics
  • Record call (best practice)
  • Follow up with non-real-time promotion (email/letter)

Consent management:

  • Maintain consent database
  • Timestamp all consents
  • Specify what consents cover (investment types)
  • Honor opt-outs immediately
  • Review and reconfirm consents annually
  • Train staff on consent requirements

Overseas Element Compliance Checklist

For investments with overseas element:

  • Identify all overseas aspects (issuer, custodian, jurisdiction)
  • Draft clear disclosure of overseas element
  • State which regulator oversees (or if unregulated)
  • Confirm FSCS applicability (usually NO)
  • Disclose alternative compensation scheme (if any)
  • State governing law and dispute jurisdiction
  • Present disclosures prominently
  • Include in all promotional materials
  • Review and update annually

For overseas persons promoting in UK:

  • Obtain Section 21 approval from UK authorized firm
  • Disclose overseas person status
  • Provide UK contact for complaints
  • Ensure UK firm reviews and approves content
  • Do not misrepresent as UK firm

Common Mistakes

Cold Calling Mistakes:

Mistake 1: Assuming consent from enquiry

  • Prospect requested brochure
  • ≠ Consent to telephone call
  • Fix: Obtain express telephone consent separately

Mistake 2: Using purchased lists

  • Buying “investment leads”
  • No valid consent to firm specifically
  • Fix: Only call those who consented to YOUR firm

Mistake 3: Calling existing clients about different products

  • Client has ISA, call about pension transfer
  • Different investment types
  • Fix: Only call about same broad type or obtain new consent

Mistake 4: Not recording consent

  • “Client agreed verbally”
  • No evidence if challenged
  • Fix: Document all consents with timestamp

Mistake 5: Ignoring opt-outs

  • Client says “don’t call again”
  • Calling back weeks later
  • Fix: Update records immediately, honor permanently

Overseas Element Mistakes:

Mistake 1: Burying overseas disclosure

  • Small print on page 10
  • After client commits
  • Fix: Prominent upfront disclosure

Mistake 2: Vague language

  • “International arrangements apply”
  • “Different regulatory framework”
  • Fix: Specific statements (country, regulator, FSCS not applicable)

Mistake 3: Implying UK protections apply

  • “Regulated investment” (but not by FCA)
  • Showing FSCS logo without clarifying limitations
  • Fix: Clear statement of what protections do NOT apply

Mistake 4: Post-Brexit confusion

  • Treating EEA firms as if still passporting
  • Not recognizing they’re now “overseas”
  • Fix: Update all EEA firm promotions with overseas disclosures

Penalties

Cold calling breaches:

  • Criminal prosecution (up to 2 years imprisonment)
  • FCA enforcement action against firm
  • Unlimited fines
  • Senior manager accountability
  • Prohibition orders

Misleading overseas promotions:

  • Breach of COBS 4.2 (fair, clear, not misleading)
  • Breach of COBS 4.9 (overseas element)
  • FCA enforcement
  • Compensation orders
  • Reputational damage

Recent cases:

  • Individuals jailed for cold calling about unregulated bonds
  • Firms fined for omitting overseas element disclosures
  • Senior managers prohibited for failing to supervise cold calling

Citation

Sources

Contains public sector information licensed under the Open Government Licence v3.0 where applicable. This is not legal advice. Always refer to official sources for authoritative text.

llms.txt