NB: Only the original text of rules can be regarded as definitive.RULES APPLICABLE TO ALL DISCRETE INVESTMENT BUSINESSDiscrete investment business (DIB) may only be conducted by persons who have achieved qualified person status in the appropriate category, or by other persons acting under the direct supervision of such persons (SIBR Rule 20).In addition to the rules which apply to all investment business, the following rules must be followed whenever DIB is being undertaken.1.

Introductory documentation1.1 Authorisation statement (SIBR Rule 21)Firms which are authorised to conduct DIB must display a statement in the following terms on all their business letters, notices and other publications relating to their DIB activity: 'Authorised by the Law Society to conduct investment business' 'Regulated by the Law Society in the conduct of investment business'.1.2 Client information (SIBR Rule 24)No DIB may be conducted until the firm has supplied the client with a written statement containing the information shown in SIBR Appendix 2.

This amounts to a special form of client care letter for financial services.1.3 Client agreement (SIBR Rule 24)If discretionary portfolio management services are to be provided in relation to any type of Investment, the salient terms must be recorded in a formal agreement.

This agreement must be signed by the client, after being given time for due consideration, and must be retained for six years.2.

Know your client (SIBR Rule 22)Before making personal recommendations to clients (as opposed to circulating general recommendations via mail-outs and newsletters), and before effecting transactions on c lients' behalf, firms must obtain sufficient information to satisfy themselves that the course they propose to adopt is suitable for the client and that the client understands the risk involved.2.1 Client fact-find (SIBR Rule 27(1)(a))Firms must obtain and record whatever information about the client and his or her affairs that may be relevant to the business to be undertaken.

The record which is made must be retained for a period of not less than 6 years.

There is no need to record a fact-find where the 'client' is a partner of the firm.2.2 Suitability (SIBR Rule 22(1)(a)&(b))Having regard to the facts disclosed in the factfind, firms must satisfy themselves of the suitability for their clients of recommendations made and transactions undertaken.2.3 Risk warning (SIBR Rule 22(2))Firms must ensure that clients (other than the firm's partners) to whom personal recommendations are made understand the risk involved in any proposed course of action, including agreeing to give the firm discretionary portfolio management responsibility.

It is good practice to record risk warnings in writing.3.

Other records: record of DIB clients (SIBR Rule 27(2))3.1 Record of DIB clients (SIBR Rule 27(2))A record must be kept, separate from the client files, of the names of clients for whom DIB is conducted.3.2 Contract notes (SIBR Rule 23)A contract note containing details of transactions in investments other than life policies must be sent to clients as soon as possible after the transaction is completed unless the clients have already been notified (eg by allotment letter in the case of a rights issue).

If no contract note is provided by the stockbroker or product provider, the firm must generate its own before the close of business on the day the transaction is effected.3.3 Up-dated schedules of documents (SIBR Rule 17)Whereas firms conducting all types of investment business (other than 'incidentally') must maintain a record of any documents of title to investments of which they retain custody on behalf of the client in connection with such business, firms which conduct DIB must in addition send to the client at least once a year a statement itemising the documents held.

Anomalously, the definition of the investments to which this requirement relates does not include life and pension policies.

In practice, however, they are likely to be included because clients will wish to have a full record of all the documents held on their behalf.

Arrangements for the custody of documents of title to securities may need to be reviewed in the light of the demands of rolling settlement.3.4 Review of managed portfolios (SIBR Rule 25)Unless the client agrees in writing to dispense with this service, firms which undertake to keep their clients' portfolios under review must send the client at suitable intervals (possibly annually in the case of advisory portfolios and more frequently in the case of discretionary portfolios) a statement setting out certain information specified in SIBR Appendix 3.3.5 Accounting (SIBR Rule 26)When firms raise fee bills in relation to DIB, these must either be separate bills or, if they include charges for legal work, must show separately the fee attributable to the DIB.

Such bills must also be identified or recorded separately.

This rule does not apply when the DIB is 'incidental' to the firm's legal work or where the firm is acting as trustee or attorney as defined in SIBR 19(2) (see below).

Equally, DIB which is incidental or falls under SIBR 19(2) need not be declared as DIB fee income on form RF1/ RF2 (application for an investment business certificate).

Thus if charges for mortgage work undertaken incidentally to conveyancing are expressed as fees, then even if they are satisfied by the retention of commission, these charges will not count against the 35% business limit.4.

Exclusions: trustees and powers of attorney (SIBR Rule 19(2))When a firm or member of a firm conducts DIB while acting as a trustee (other than bare trustee), or a donee of an enduring power of attorney, or a trustee power of attorney, or as receiver appointed by the court of protection, the following rules do not apply: rule 22(2): risk warning; rule 23: contract notes; rule 24: client information and agreements; rule 25: managed portfolio statements; rule 26: bills of costs.-- This guidance is taken from the SIFA manual of financial services services for solicitors which is available from publishers Sweet & Maxwell on 28 days free trial; telephone: 01264 342 899.