In Policy Statement 17/13, the FCA has published final rules (in COBS 11A.2) to prohibit UK firms from entering into written agreements with their clients (whether based in the UK or overseas) which contain restrictive clauses. The prohibition extends to clauses which give firms a "right to act", i.e. the right to provide any future primary capital market or M&A services to the client, or "right of first refusal", i.e. the firm has the right to enter into the transaction before anyone else can.
The following features of the FCA's final rules are also worth noting:
- the ban only applies to entering into written agreements containing clauses relating to unspecified and uncertain future services (the FCA suggests, correctly in our view, that it is questionable whether such clauses would be enforceable in any event) – there is no restriction on firms agreeing terms for specific and known future work;
- "right to match" clauses are acceptable – this covers clauses that allow firms the chance to match an offer made to a client by another firm, so long as the client retains the right to choose either firm to provide the service;
- the ban applies to clients of all sizes;
- the ban only affects primary market services;
- restrictive clauses contained in bridging loan agreements or agreements for warehouse facilities are excluded from the ban, because there are legitimate commercial reasons for their inclusion;
- the FCA rejected the argument that the ban (and its geographic scope in particular) would prejudice UK firms at the expense of their international counterparts (which, it was said, would be able to price initial work more cheaply because of the use of restrictive clauses ensuring income from future work).
The ban will take effect from 3 January 2018.
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