Published May 2026 · 9 min read
Chapter 2 of the CISI UK Financial Regulation syllabus carries more exam marks than any other section. Approximately 35 of the 75 questions on the real paper come from COBS and CASS — nearly half the exam. For an overview of how COBS and CASS differ, see COBS vs CASS — what's the difference. Getting Chapter 2 right is the single biggest determinant of whether a candidate passes or fails.
The Conduct of Business Sourcebook (COBS) is the FCA's rulebook for how authorised firms must behave when dealing with clients in relation to designated investment business. It covers the full lifecycle of a client relationship — from initial communication and categorisation through to ongoing reporting and complaints handling.
COBS is not background reading. It is the core of the exam. A candidate who knows COBS to a high level of precision can pass the UK Financial Regulation exam even with average performance on the other three chapters. A candidate who is vague on COBS cannot.
Everything in COBS flows from client categorisation. Before a firm can determine what obligations apply, it must know what type of client it is dealing with.
This is the area that costs more exam marks than any other in Chapter 2.
COBS 4 governs how firms communicate with clients. The overarching standard is that communications must be fair, clear and not misleading — a phrase that runs through the whole of COBS 4 and connects to Principle 7 of the FCA's Principles for Businesses.
A financial promotion is any communication that invites or induces a person to engage in investment activity. It does not need to be a formal advertisement — a telephone call or email can be a financial promotion if it meets the definition.
Best execution requires firms to take all sufficient steps to obtain the best possible result for clients when executing orders. Price and costs are the most important factors for most retail clients in most circumstances — but best execution involves a range of factors including speed, likelihood of execution, size, and nature of the order.
Best execution does not mean getting the best price on every single trade — it means having a policy designed to achieve the best outcome consistently. It is disapplied for eligible counterparty business.
Confusing suitability and appropriateness. The single most tested distinction in COBS. Know precisely which applies when, and what the firm's obligations are in each case.
Assuming all COBS protections apply to all clients. ECPs receive significantly reduced protection. Questions will present scenarios involving institutional counterparties and test whether specific obligations apply.
Treating best execution as price-only. Price and costs are primary for retail clients, but best execution involves a range of factors. Questions that present scenarios where price is not the only relevant consideration are common.
To drill Chapter 2 with a large bank of COBS and CASS questions, see why practice question volume matters — and how to use questions effectively. For the full preparation guide, see how to pass the CISI UK Financial Regulation exam.
MockSmith has a large bank of COBS and CASS questions as part of its 1,000+ question set for the CISI UK Financial Regulation exam. Every question includes a full explanation of why the correct answer is right and why each incorrect option is wrong.
Get access for £29.99 →Chapter 2 is where the CISI UK Financial Regulation exam is won or lost. Candidates who know COBS to a high standard of precision pass. The candidates who treat it as one of four equal sections frequently do not.