Chapter 4Code of Conduct
Member to comply with relevant legislation
All members shall strictly comply with and adhere to the Act, any regulations made under the Act, and these rules, and shall at all times act according to the principles of best practice and, in particular, shall –
- act honestly and fairly;
- observe high standards of market conduct;
- seek from customers information about their circumstances and investment objectives which might reasonably be expected to be relevant in enabling them to fulfil their responsibilities to their customers;
- take reasonable steps to give every customer they advise, in a comprehensible and timely way, any information needed to enable customers to make a balanced and informed investment decision;
- give first priority to the best interests of their customers;
- take all reasonable steps to protect and secure customers’ funds for which they are properly responsible;
- maintain adequate financial resources to meet their business commitments and withstand the risks to which their business is subject;
- avoid any conflict of interest with their customers;
- not recommend a transaction to a customer unless they have taken reasonable steps to enable the customer to understand the nature of the risks involved;
- when buying or selling on their own account, inform the customer of this fact;
- deal with customer and own account orders fairly and in due turn;
- when they have agreed to effect or arrange a customer order, effect or arrange the execution of the order as soon as reasonably practicable in the circumstances;
- provide best execution for their customers;
- ensure that every transaction they execute is promptly allocated;
- where they have aggregated an order for a customer transaction with an order for an own account transaction, or with another order for a customer transaction, then in the subsequent allocation they must not give unfair preference to themselves or to any of those for whom they have dealt; and if all orders cannot be satisfied, they must give priority to satisfying orders for customers transactions;
- take reasonable steps to ensure that they do not make any personal recommendation to a customer, or effect or arrange a discretionary transaction with or for a customer, unless the recommendation or transaction is suitable for him having regard to the facts about that customer of which they are, or reasonably ought to be, aware;
- where they effect a sale or purchase of securities with or for a customer, ensure that the customer is sent with due dispatch a note containing the essential details of the transaction.
Where a member is advising or acting for a customer it shall ensure that any claim it makes as to its independence or impartiality adequately includes any limitation that there may be on either.
Where a member has a material interest in a transaction to be entered into with or for a customer, or a relationship which gives rise to a conflict of interest in relation to such a transaction, the member shall not knowingly either advise, or deal in the exercise of discretion, in relation to that transaction unless it has –
- disclosed that material interest or relationship, as the case may be, to the customer; or
- taken reasonable steps to ensure that neither the material interest nor relationship adversely affect the interests of the customer.
A member must take reasonable steps to ensure that neither it nor any of its representatives, employees or agents either offers or gives, or solicits or accepts, any inducement that is likely to conflict with any duties owed to customers.
Fair and clear communication
A member shall take reasonable steps to ensure that any agreement, written communication, notification or information that it gives or sends to customers to whom it provides securities services is presented fairly and clearly.
Customers’ understanding of risk
A member shall not –
- recommend a transaction to a customer, or effect a discretionary transaction with or for him, unless it has taken all reasonable steps to enable the customer to understand the risks involved;
- knowingly mislead a customer as to any advantages or disadvantages of a contemplated transaction; or
- promise a return unless such return is contractually guaranteed.
Information about member
A member shall take reasonable steps to ensure that a customer to whom it provides securities services is given adequate information about its identity and business address and the identity and status within the member’s firm of employees and other relevant representatives with whom the customer has contact.
Representatives of member
- A member shall satisfy itself on reasonable grounds and on a continuing basis that any representative it appoints is fit and proper to act for it in that capacity.
- The member shall also satisfy itself on reasonable grounds and on a continuing basis that it has adequate resources to monitor and enforce compliance by its representatives with high standards of business conduct.
Where customer agreement required
- No member shall undertake –
- the discretionary management of a portfolio;
- transactions in futures and options; or
- any other type of business that is prescribed by the Council,except under a written agreement between the member and the customer duly signed by the customer and returned to the member.
- The Council may from time to time prescribe special procedures relating to the operation of discretionary accounts and every member shall follow such special procedures or shall secure that such special procedures are followed.
- Where a member provides securities services to a customer on written contractual terms (whether pursuant to rule 4.09 or otherwise), the agreement shall set out in adequate detail the basis on which those services are provided.
- A court of competent jurisdiction may, if it considers it just and equitable to do so, by order set aside or vary an agreement entered into in contravention of this rule, but no such order affects any dealing or transaction entered into or carried out by the member on behalf of the customer.
- A member shall not, in any written communication or agreement, seek to exclude or restrict –
- any duty or liability to a customer which it has under any law or under any rules made by the Council;
- any other duty to act with skill, care and diligence that is owed to a customer in connection with the provision to him of securities services;
- any liability owed to a customer for failure to exercise the degree of skill, care and diligence that may reasonably be expected of it in the provision of securities services.
- A purported exclusion or restriction prohibited by this rule shall be void and of no effect.
A member shall take all reasonable steps to ensure that it does not give securities advice to, nor effect a discretionary transaction with or for, a customer unless that advice or transaction is suitable for him having regard to the facts disclosed by that customer and other relevant facts about the customer of which the member is or ought reasonably to be aware.
- A member’s charges shall not be unfair in their incidence or unreasonable in their amount having regard to all relevant circumstances.
- Before a member provides securities services to a customer it shall disclose to him the basis or amount of its charges for the provisions of those services and the nature of and amount of any other remuneration receivable by it and attributable to them.
Where a member acts as an investment manager for a customer, it shall ensure that the customer is sent at suitable intervals a report stating the value of the portfolio or account at the beginning and end of the period, its composition at the end and, in the case of a discretionary portfolio or account, changes in its composition between those dates.
Customer order priority
A member shall always give priority to outstanding customer orders.
Where a customer order has been received, or a member has decided in its discretion to effect a customer order, it shall effect the execution of the order without delay.
Where a member deals for a customer, it shall deal on the terms which are the best available to the customer.
A member shall ensure that a transaction it executes is allocated forthwith.
Where a member has aggregated an order for a customer transaction with an order for an own account transaction, or with an order for another customer transaction, then in the subsequent allocation –
- it shall not give unfair preference to itself or to any of those for whom it dealt; and
- if all orders cannot be satisfied, it shall give priority to satisfying orders for customer transactions.
Where a member has a large customer order to execute, or where it intends to publish to customers a price-sensitive recommendation or research or analysis, it shall not knowingly effect an own account transaction in the securities concerned or in any related securities until the large order has been executed or until the customers for whom the publication was principally intended have had, or are likely to have had, a reasonable opportunity to react to it.
A member shall not –
- deal or arrange a deal in the exercise of discretion for any customer; or
- advise a customer to deal,
if the dealing could in the circumstances reasonably be regarded as too frequent or too large.
A member shall take reasonable steps to ascertain if any of its customers are insiders, and shall maintain records accordingly to assist in the monitoring of insider dealing as may be prescribed by the Council or GASCI.
Safeguarding of customer investments
A member who has custody of a customer’s securities in connection with or with a view to securities business shall –
- keep safe, or arrange for the safekeeping of, any documents of title, or documents evidencing title, relating to them; and
- ensure that any securities that it buys or holds for a customer are properly registered in his name or, with the written consent of the customer, in the name of an appropriate nominee.
A member shall have internal procedures to ensure the proper handling of complaints from customers and to ensure that any appropriate remedial action on those complaints is promptly taken.
- A member shall take reasonable steps, including the establishment and maintenance of procedures, to ensure that –
- its officers, employees and other representatives are aware of their obligations under the Act and regulations made under the Act, and that they act in conformity with them; and
- sufficient information is recorded and retained about its securities business and compliance with the Act and regulations made under the Act.
- Records required to be maintained by the Council shall be kept available, for a period of not less than 6 years, by the member for inspection by any person duly authorised by the Council.
A member shall establish and maintain procedures –
- for the supervision of each of its officers, employees and other representatives; and
- for ensuring that each such person does not give advice or provide services of such a nature as is beyond his competence to give or to provide.
- Subject to paragraph (2), all information in the possession of a member relating to a customer shall be kept confidential by it.
- A member may disclose information relating to a customer when properly required to do so by the Council or GASCI, or if it is ordered to do so by a court of competent jurisdiction.
- Subject to paragraph (2), no member shall, for the purpose of soliciting business, make an unsolicited telephone call, or attend at any address without first being invited by an occupant.
- Paragraph (1) does not apply in relation to existing customers.
Cessation of business
Where a member decides to withdraw from securities business it shall –
- forthwith notify GASCI, the Council and each of its customers of such decision;
- ensure to the satisfaction of GASCI and the Council that any such business which is outstanding is properly completed or transferred to another member.
Member to observe decisions of the Board
Members shall accept as final and binding and abide by all decisions, rulings and directions of the Board and any other person or body of persons authorised by the Board in the lawful execution of its powers pursuant to these rules, provided that in all cases where the ruling is covered by the Act or subsidiary legislation made in accordance with the Act the member shall have the right of appeal to the Council.
Member to refrain from activities detrimental to GASCI
A member shall not do or cause to be done any act, matter or thing which would adversely affect the goodwill or public image of GASCI or its members.
Member to act in best interest of customers
A member shall at all times act and procure or ensure that his representatives and other employees act in the best interests of his customers.
Member to report to GASCI in certain circumstances
A member shall report in writing to GASCI any breach, infringement of or non-compliance with any of these rules or where it has reason to suspect any such breach, infringement or non-compliance whether by itself or by any other member giving particulars of and/or the reasons for suspecting such breach, infringement or non-compliance and all other relevant information and documents.