COB 4.3 1Disclosing information about services, fees and commission - packaged products

1. (1)

   COB 4.3 applies:2

   2
   1. (a)

      to a firm when carrying on with or for private customers any of the following in relation to packaged products: 2

      2
      1. (i)

         advising; or 2

      2. (ii)

         dealing as agent; or 2

      3. (iii)

         arranging;2

   2. (b)

      to a firm, other than an insurer, that carries on in relation to a life policy any of the activities in (1) with or for an intermediate customer or a market counterparty. 2

      2
2. (2)

   COB 4.3, other than COB 4.3.7R (1) and (2), does not apply to a firm when providing basic advice on a stakeholder product.2

   2

1. (1)
   1. (a)

      A firm must take reasonable steps to ensure that its representatives on first making contact with a private customer with a view to:

      1. (i)

         advising on investments on packaged products; or

      2. (ii)

         dealing as agent in packaged products; or

      3. (iii)

         arranging (bringing about) deals in packaged product; or

      4. (iv)

         making arrangements with a view to transactions in life policies;

      provide the customer, in a durable medium, with information concerning:

   2. (b)
      1. (i)

         the firm and the scope of and nature of its services (an initial disclosure document); and

      2. (ii)

         where (a)(i) applies, the firm's arrangements for charging and receiving fees and commission (a fees and commission statement);

   in both cases being information which the firm reasonably considers will be, or is likely to be, appropriate for the customer having regard to the type of service which the firm may provide or business which the firm may conduct.

2. (2)

   A firm must also provide a private customer with an initial disclosure document if, in relation to the amendment of a life policy for that private customer, it:

   1. (a)

      advises on investments on packaged products; or

   2. (b)

      deals as agent in packaged products; or

   3. (c)

      arranges.

3. (3)
   1. (a)

      The requirements in (1) and (2) do not apply:

      1. (i)

         to the extent that the appropriate information has already been given to the customer on a previous occasion and that information is still likely to be accurate and appropriate for the customer; or

      2. (ii)

         if COB 4.3.16 G (initial contact by telephone) applies; or

      3. (iii)

         to a firm when it carries out an execution only transaction in non-life packaged products; or

      4. (iv)

         to an insurer for those customers in respect of which it is not advising on investments.

   2. (b)

      A firm that reasonably expects it will not be advising on investments in respect of products falling within any of the product groups set out in Note 14 to COB 4 Annex 6R does not have to comply with the requirements in (1)(b)(ii) but if it does advise on investments on these products the rules will apply to the firm in respect of the fees and commission statement as if it was required by (1)(b)(ii) to provide the statement.

4. (4)

   The requirements in (1) and (2) will apply to:

   1. (a)

      a firm that is acting as a discretionary investment manager for private customers; or

   2. (b)

      a firm which is effecting execution-only transactions in packaged products for private customers;

   only if the firm is carrying on an insurance mediation activity in relation to life policies for those private customers, in which case the requirements in (1) and (2) will only apply to the extent of requiring the firm to provide those private customers with an initial disclosure document.

5. (5)

   A firm which acts for a private customer under a non-discretionary management agreement need not comply with the requirements in (1) above to provide an initial disclosure document or a fees and commission statementif the following are satisfied:

   1. (a)

      the firm is remunerated by the customer by the payment of a fee; and

   2. (b)

      the agreement provides that the firm may recommend securities as well as packaged products for inclusion in the customer's portfolio and that in respect of packaged products the firm will make selections from the whole market;

   but such a firm must, if it is carrying on an insurance mediation activity for a private customer in relation to life policies, comply with the requirements in (1) as to the provision of an initial disclosure document to the private customer.

6. (6)

   A firm which is required in accordance with this rule to provide an initial disclosure document to a private customer may instead provide the customer with a combined initial disclosure document if it has reasonable grounds to be satisfied that the services which it is likely to provide to the customer will, in addition to packaged products, relate to one or more of the following:

   1. (a)

      regulated mortgage contracts other than lifetime mortgages5;

   2. (aA)

      5home purchase plans;

   3. (b)

      equity release transactions5;

   4. (c)

      non-investment insurance contracts.

7. (7)

   The information contained in the initial disclosure document may be provided orally if a firm has not made a personal recommendation to a private customer, and:

   1. (a)

      the customer requests it; or

   2. (b)

      immediate cover is necessary;

   but in both cases the firm must provide the initial disclosure document immediately after the conclusion of the contract, in a durable medium.

8. (8)

   4A firm must take reasonable steps to ensure that its representatives on first making contact with a private customer with a view to advising on investments in SIPPs, personal pension deposits, or personal pension products, inform the customer of the amount and nature (i.e. fees and/or commission (or equivalent) and/or a combination of fees and commission (or equivalent)) of any payments that the customer will have to pay, directly or indirectly, for the advice on investments.

A firm must take reasonable steps to ensure that it provides a private customer with an appropriate fees and commission statement whenever requested to do so.

1. (1)

   A firm must before starting to act for a private customer on the basis of a fee charging arrangement:

   1. (a)

      secure the customer's agreement to the particular rate or amount which the firm will charge for its services; and

   2. (b)

      provide the customer with a record in a durable medium of the particular fee charging arrangement which will apply unless the firm starts to act for the private customer during a telephone call, in which case this record must be forwarded to the customer on conclusion of the call.

2. (2)

   A firm which charges a private customer a fee must do so on the basis that it will, in respect of any commission which it receives in respect of transactions in packaged products for that customer (and to which the particular fee charging arrangement relates), ensure the value of that commission is transferred to the customer by one or more of the following:

   1. (a)

      reducing the amount of its fee;

   2. (b)

      arranging for the amount invested by the customer to be increased; or

   3. (c)

      refunding the amount of the commission to the customer;

   except that this does not prohibit such a firm from agreeing with the customer (in writing) that it will retain an amount or rate of trail or renewal commission up to an amount each year specified in the agreement and so small, relative to the overall amount of fees paid by the customer, that it would be manifestly disproportionate for the firm to be required to account to the customer in one of the ways outlined in (a) to (c).

1. (1)

   A firm which has started to provide a private customer with services in relation to packaged products following the provision of a fees and commission statement or the original payment information4 must not (at least until the completion of those services):

   1. (a)

      increase the rate or amount of the fees it is charging the customer; or

   2. (b)

      subject to (4), arrange to retain any commission which exceeds the maximum amount or rate disclosed ;

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   without first providing a further appropriate statement or further payment information4 and obtaining the customer's prior consent to the proposed alteration in a durable medium.

2. (2)

   A firm which in accordance with (1) secures a private customer's agreement to retain an increased rate or amount of commission must ensure that, if it subsequently provides the customer with a suitability letter, it includes an explanation of why it was necessary for the principal to recommend a packaged product in respect of which the firm will retain such higher commission or fees.

3. (3)

   If a firm decides to provide a private customer with advice on investments on a type of packaged product (which falls within a product group specified in Notes4 14 or 18A 4to COB 4 Annex 6R) in relation to which the fees and commission statement previously given to the customer does not contain the information required in those Notes4, it must issue a new and appropriate statement or payment information4 to that customer.

4. (4)
   1. (a)

      Notwithstanding (1)(b) a firm is not required to provide a further fees and commission statement or further payment information 4for the purposes of (1) if:

      1. (i)

         the maximum amounts or rates already 4disclosed to the customer only apply to products4of the example term or age of customer 4given, or to products4with shorter terms; and

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      2. (ii)

         the firm arranges a product4for a term longer than the example term (or longer than the term deemed for the example age given) and the increase in the commission which the firm arranges to retain over the maximum already 4disclosed is not more than an amount that is directly proportional to the increase in the duration of the term of the product4(or to the term deemed from the age of customer4).

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   2. (b)

      If requested by a customer, a firm must explain the basis of the higher maximum commission or fees charged in accordance with (4)(a)(ii).

1. (1)

   An initial disclosure document must contain the Key facts logo, headings and text in the order shown in COB 4 Annex 4R and in accordance with the Notes.

2. (2)

   A combined initial disclosure document must contain the Key facts logo, headings and text in the order shown in COB 4 Annex 5R and in accordance with the Notes.

3. (3)

   If a private customer so requests, a firm should be able to provide an explanation of the basis on which it has chosen to market the particular packaged products within the range from which advice on investments will be given to that customer including an explanation of why the firm has selected particular product providers.

4. (4)

   Information given in the initial disclosure information about compensation arrangements made by an investment firm must:

   1. (a)

      (if it relates to the activities of an establishment in the United Kingdom) be in English; or

   2. (b)

      (if it relates to the activities of a branch in another EEA State) be in an official language of that EEA State.

5. (5)

   Information given in the initial disclosure information about the insurance mediation activities of a firm must be in English, unless the customer requests it to be, and the firm agrees to it being, in another language.1

1. (1)

   A fees and commission statement must contain the Key facts logo, heading and text in the order shown in COB 4 Annex 6R and in accordance with the Notes.

2. (2)

   A firm must maintain as many versions of the fees and commission statement set out at COB 4 Annex 6R as are appropriate to the different bases on which it may conduct business with private customers:

   1. (a)

      fee only (version 1);

   2. (b)

      commission (or equivalent) only (version 2);

   3. (c)

      fee or commission (or equivalent) (version 3);

   4. (d)

      fee or commission (or equivalent); or combination of commission (or equivalent) and fee (version 4);

   5. (e)

      commission (or equivalent); or combination of commission (or equivalent) and fee(version 5);

   6. (f)

      fee; or combination of commission (or equivalent) and fee (version 6).

3. (3)

   A firm must keep its fees and commission statements up to date and keep a record of each fees and commission statement for a period of six years from the date on which it was updated or replaced.

4. (4)

   A firm must maintain a record of each particular fees and commission statement which it provides to a private customer (other than when given merely in response to a request).1

1A firm which operates with a range (or ranges) of packaged products must produce in a durable medium, and in a form which is appropriate for distribution to private customers, the record of its range (or ranges) of packaged products which it maintains for the purposes of COB 5.1.6ER (1).

1A firm must take reasonable steps to ensure that its representatives provide a copy of the appropriate range of packaged products on the request of a private customer having regard to the services it is providing or may provide to the customer.

1. (1)

   1A firm which complies with COB 4.3.3 R will, in respect of any requirement imposed by COB 4.2 as to the delivery or content of information to be included in its terms of business, be regarded as complying with any such analogous requirement.

2. (2)

   Any information required by COB 4.2 which is not covered by (1) may be satisfied by it being included at the end of an initial disclosure document which is given to a private customer in accordance with COB 4.3.3 R or, if provided at the same time, by way of separate items of information.

1. (1)

   Where a firm's initial contact with a private customer (for a purpose set out in COB 4.3.3R (1)) is by telephone then the following information must be provided and requirements satisfied before proceeding further:

   1. (a)

      the name of the firm and, if the call is initiated by or on behalf of a firm, the commercial purpose of the call;

   2. (b)

      whether the firm offers packaged product from the whole market or from a limited number of companies or from a single company or single group of companies;

   3. (c)

      whether the firm will provide the customer with advice on investments on packaged products;

   4. (d)

      if the firm does not offer products from the whole market, that the customer can request a copy of the appropriate range of packaged products;

   5. (e)

      whether the firm offers a fee based service, a commission based service, a service based on a combination of fee and commission, or a combination of these three types of services, and the consequences for the customer of proceeding with each type of service;

   6. (f)

      that the information given under (a) to (e) will subsequently be confirmed in writing.

2. (2)

   A firm which complies with (1) will, subject to (3), satisfy the condition set out in item (1) of COB 4 Annex 1.

3. (3)

   If during the course of a telephone call a firm is to conclude a contract (whether for the provision of a mediation services and/or for the purchase or sale of a packaged product), it must as well as complying with (1) and (2) above satisfy the requirement in COB 4.2.5 R and COB 4 Annex 1.

4. (4)

   If a firm's initial contact with a private customer by telephone is such that COB 4.3.3 R (other than COB 4.3.3R (3)(a)(ii)) applies then, subject to any relevant exclusions, it must send the customer an initial disclosure document and a fees and commission statement as soon as is reasonably practicable following the conclusion of the call.

Intermediate customers and market counterparties (and private customers who are introduced): disclosure before conclusion of the contract or immediately after conclusion of the contract 1

1. (1)

   1COB 4.3.20 R to COB 4.3.25 R apply to a firm, other than an insurer, when it conducts any of the following in relation to life policies with or for an intermediate customer or a market counterparty:

   1. (a)

      advising on investments; or

   2. (b)

      dealing; or

   3. (c)

      arranging.

2. (2)

   COB 4.3.26 R (disclosure by introducers) applies to a firm:

   1. (a)

      when it introduces a private customer to another firm;

   2. (b)

      other than an insurer when it introduces an intermediate customer or market counterparty to another firm.

1. (1)

   1The information in COB 4.3.21 R must be provided to the client in a durable medium at any time before conclusion of the contract, and if necessary upon amendment or renewal thereof, unless (2) or (4) applies.

2. (2)

   The information in COB 4.3.21 R:

   1. (a)

      may be provided orally if:

      1. (i)

         the client requests this; or

      2. (ii)

         the client requires immediate cover;

   2. (b)

      need not be provided before conclusion of the contract if the contract is concluded by telephone, but if the client is a retail customer the requirements in COB 4.2.5 R and COB 4 Annex 1 must be satisfied.

3. (3)

   If (2) applies, the client must be provided with the information in COB 4.3.21 R in a durable medium immediately after the conclusion of the contract.

4. (4)

   The requirements in (1) do not apply to the extent that the information has already been given to the client on a previous occasion and that information is still likely to be accurate and up to date.

1. (1)

   1A firm must provide the information specified in COB 4.3.21 R:

   1. (a)

      (if it relates to the activities of an establishment in the United Kingdom) in English; or

   2. (b)

      (if it relates to the activities of a branch in another EEA State) in an official language of that EEA State.

2. (2)

   The information provided by a firm pursuant to COB 4.3.20 R and which relates to the firm'sinsurance mediation activities, must be in English, unless the customer requests it to be, and the firm agrees to it being, in another language.

1. (1)

   1A firm that provides a service of a type described in COB 4.3.21 R must maintain, and keep up to date, for each type of life policy it deals with, a list of insurance undertakings it deals with.

2. (2)

   The information in (1) must be maintained in a form which allows a copy to be provided to a client on request, in accordance with COB 4.3.21 R, in a durable medium.

1. (1)

   1A firm that only introduces a client to another firm with a view to a transaction in a life policy, must provide the information in COB 4.3.21 R (1) and (2) at the time it makes initial contact with the client. The information may be provided orally.

2. (2)

   If the information required in (1) is provided orally, the information in COB 4.3.21 R (1) and (2) must be provided in a durable medium immediately after the initial contact between the firm and the client.

1A firm must take reasonable steps to ensure that its representatives on first making contact with an employee with a view to advising on his employer's group personal pension scheme or stakeholder pension scheme, inform the employee:

1. (1)

   that the firm will be providing advice on investments on group personal pension schemes and/or stakeholder pension schemes provided by the employer;

2. (2)

   whether the employee will be provided with advice on investments:

   1. (a)

      that is restricted to the group personal pension scheme or stakeholder pension scheme provided the employer; or

   2. (b)

      the matters in (a) and other products;

3. (3)

   the amount and nature (ie fees and/or commission (or equivalent) and/or a combination of fees and commission (or equivalent)) of any payments that the employee will have to pay, directly or indirectly,4 for the advice on investments.