This section applies to a firm which gives advice on investments to a private customer on packaged products.2

1. (1)

   2A firm which gives advice on investments to private customers about packaged products must, subject to (2), take reasonable steps to ensure that the scope of the advice on investments given to a private customer is based upon a selection from one of the following:

   1. (a)

      the whole market (or the whole of a named sector of the market); or

   2. (b)

      a limited number of product providers; or

   3. (c)

      a single company or single group of companies.

2. (2)

   A firm may change the scope of the advice on investments it gives to a particular private customer by widening the scope from that in (1)(c) through to that in (b) or (a) or from (b) to (a), but it must take reasonable steps to ensure that before doing so the customer is made aware of the proposed change by a communication in a durable medium.

3. (3)

   If a firm:

   1. (a)

      extends the scope of the advice on investments it will give a private customer; or

   2. (b)

      extends the range of packaged products on which its advice on investments will be based;

   and as a consequence the firm's arrangements for its remuneration are materially altered, the firm must provide the customer with a new and appropriate fees and commission statement.

1. (1)

   2A firm must maintain in writing and keep up to date a statement of:

   1. (a)

      the scope of advice on investments (within the meaning of COB 5.1.6AR (1)) which each of its appointed representatives is, through its contract with the firm, permitted to give; and including

   2. (b)

      the range (or ranges) of packaged products on which each appointed representative advises.

2. (2)

   In applying the rules in COB to a firm in respect of its appointed representatives, references to a firm's scope or range of packaged products are to be taken as references to the scope (or scopes) and to the range (or ranges) of its appointed representatives.

1. (1)

   2A firm must make, and keep up to date, a record of the scope (or scopes) of the advice (within the meaning of COB 5.1.6AR (1)) which it provides, its range (or ranges) of packaged products and the associate or ranges of each of its appointed representatives (if different from the firm's).

2. (2)

   The record in (1) must be retained for six years from the date on which it was superseded by a more up-to-date record.

3. (3)

   The record for distribution to a customer must be the particular range of packaged products which is appropriate for the services provided to that customer and include details of:

   1. (a)

      the identity of the product providers within the range whose packaged products the firm may sell; and

   2. (b)

      a list of the categories of their products the firm may sell.

4. (4)

   In the case of a firm whose scope of advice on investments is the selection of packaged products from the whole of the market (or from the whole of a sector of the market) and which provides no other scope of advice on investments, it will be sufficient if the firm's record is restricted to confirming that the advice on investments it provides is given on this basis (and in the case of a firm which provides advice on investments on the whole of a sector of the market, confirms the nature and parameters of that sector).

5. (5)

   For the purposes of the record in (1), (3) and (6), in relation to the packaged products within a particular category available from a product provider:

   1. (a)

      where a firm provides services to a particular customer in relation to all of the products within that category the record may refer simply to that category and the product provider and not each particular product within the category; and

   2. (b)

      notwithstanding (3)(b), where a firm does not provide services to a particular customer in relation to all of the products within that category the record must give details of each of the products in the category on which it does provide services.

6. (6)

   A firm must maintain a record of the particular range of packaged products on which its advice on investments to each private customer is based and such a record must be kept for six years from the date on which the advice on investments is given.

2If a firm gives advice on investments to a private customer on a packaged product produced by another person, it must not:

1. (1)

   hold itself out as the packaged product's producer; or

2. (2)

   do or say anything which might reasonably lead a private customer to be mistaken as to the identity of the product's producer.

2A firm must display the brand of the product provider at least as prominently as any other brand in the documentation that it makes available to its customer's in relation to a packaged product.

1. (1)

   A firm must, subject to (2), take reasonable steps to ensure that neither it nor any of its representatives gives advice on investments to a private customer about the purchase of a packaged product unless the product is:2

   1. (a)

      within the firm'srange (or ranges) of packaged products; and2

   2. (b)

      is within the particular range of packaged products on which advice on investments is given to that customer.2

2. (2)

   The restriction in (1) does not apply where COB 5.3.8A R (Suitability of packaged products: out-of-range recommendations) applies.2

1. (1)

   2A firm that, in relation to packaged products, provides advice on investments to a private customer, must not hold itself out as acting independently unless it intends to:

   1. (a)

      provide advice on investments to that customer that is on packaged products from the whole market (or the whole of a sector of the market); and

   2. (b)

      offers the customer the opportunity of paying fee for the provision of such advice.

2. (2)

   A firm which in accordance with (1) holds itself out as independent must ensure that the advice on investments subsequently given to the private customer concerned is on packaged products from the whole market (or the whole of a sector of the market).

3. (3)

   A firm will not contravene (2) and does not need to offer the option of fee based advice on investments in accordance with (1), if it acts in accordance with COB 4.3.27 R.

1. (1)

   A firm must, subject to (2), take reasonable steps to ensure that those of its representatives who give advice on investments on packaged products are able to sell with advice on investments each packaged product within the particular range of packaged products from which products are selected for a customer.21

2. (2)

   A firm may restrict the packaged products it authorises a particular representative to sell, if:2

   1. (a)

      that representative is not sufficiently competent to sell certain types of product; and

   2. (b)

      it requires that representative to identify instances when another packaged product within the relevant rangepackaged products ought to be recommended; the representative must then be required to refer the private customer to another representative of the firm who is authorised and competent to sell that product.2

2A firm must take reasonable steps to ensure that none of its representatives:2

1. (1)

   is likely to be influenced by the structure of his or her remuneration to give unsuitable advice on investments to a private customer; and2

2. (2)

   refers private customers to another firm in circumstances which would amount to the provision of an inducement under COB 2.2.3 R (Prohibition of inducements).2

A firm must, if it gives advice on investments to a private customer on a stakeholder pensions scheme or other price capped product for which the firm is not the product provider, ensure that it does so only in accordance with arrangements under which the firm discloses any charges imposed by the firm in excess of those charged by the producer of the packaged product.2

This section applies to a firm that:

1. (1)

   gives a personal recommendation concerning a designated investment to a private customer; or

2. (2)

   acts as an investment manager for a private customer; or

3. (3)

   arranges a pension opt-out or pension transfer from an occupational pension scheme for a private customer; or3

4. (4)

   is not an insurer and makes a personal recommendation to take out a life policy to an intermediate customer or a market counterparty; or3

5. (5)

   is not an insurer and is arranging (but not merely by introducing) a life policy;3

6. (6)

   is not an insurer and arranges (but not merely by introducing) a life policy for an intermediate customer or a market counterparty3.

Before a firm gives a personal recommendation concerning a designated investment to a private customer, or acts as an investment manager for a private customer, it must take reasonable steps to ensure that it is in possession of sufficient personal and financial information about that customer relevant to the services that the firm has agreed to provide.

1. (1)

   Unless (2) applies, a firm must make and retain a record of a private customer's personal and financial circumstances that it has obtained in satisfying COB 5.2.5 R. The firm must retain the record for a minimum period after the information is obtained, as follows:5

   5
   1. (a)

      indefinitely for a record relating to a pension transfer, pension opt-out or free-standing additional voluntary contribution (FSAVC);5

   2. (b)

      six years for a record relating to a life policy, pension contract or stakeholder pension scheme;5 or

   3. (c)

      three years in any other case.5

2. (2)

   A firm need not retain the record where following a personal recommendation to a private customer in connection with a designated investment, the private customer does not proceed with the recommendation or any part of it.15

   5
3. (3) 5

When a firm arranges a pension opt-out or pension transfer from an OPS for a private customer as an execution-only transaction, the firm must make and retain indefinitely a clear record to evidence that no advice on investments was supplied to the private customer.2

1. (1)

   3Unless either COB 5.2.13 R or COB 5.2.14 R applies, a firm must provide the client with a statement of his demands and needs if:

   1. (a)

      it makes a personal recommendation of a life policy to a client; or

   2. (b)

      it arranges (whether through issuing a direct offer financial promotion or otherwise) for the client to enter into a life policy.

2. (2)

   Unless (3) applies, the statement in (1) must be provided:

   1. (a)

      as soon as practicable, and in any event before the conclusion of the contract for the life policy; and

   2. (b)

      in a durable medium.

3. (3)

   A firm may provide the statement in (1) orally if:

   1. (a)

      the client requests it; or

   2. (b)

      immediate cover is necessary;

   but in both cases the firm must provide the information in (1) immediately after the conclusion of the contract, in a durable medium.

3If the only contact between the firm and the client before conclusion of the contract is by telephone, the statement of demands and needs must be provided immediately after the conclusion of the contract, in a durable medium.

3A firm need not provide a statement of demands and needs if the required information is contained in a suitability letter, or explanation of a personal recommendation, provided under COB 5.3.

This section applies to a firm when it:

1. (1)

   makes a personal recommendation concerning a designated investment to a private customer; or

2. (2)

   acts as an investment manager for a private customer; or

3. (3)

   manages the assets of an occupational pension scheme (OPS) or astakeholder pension scheme; or

4. (4)

   promotes a personal pension scheme by means of a direct offer financial promotion to a group of employees; or9

5. (5)

   if the firm is not an insurer, makes a personal recommendation to an intermediate customer or a market counterparty to take out a life policy9.

1. (1)

   A firm must take reasonable steps to ensure that, if in the course of designated investment business:9

   1. (a)

      it makes any personal recommendation to a private customer to:9

      1. (i)

         buy, sell, subscribe for or underwrite a designated investment (or to exercise any right conferred by such an investment to do so); or9

      2. (ii)

         elect to make income withdrawals; or9

      3. (iii)

         enter into a pension transfer or pension opt-out from an occupational pension scheme; or9

   2. (b)

      it effects a discretionary transaction for a private customer (except as in (5)); or9

   3. (c)

      it makes a personal recommendation to an intermediate customer or a market counterparty to take out a life policy;9

   the advice on investments or transaction is suitable for the client.9

2. (2)

   If the recommendation or transaction in (1) relates to a packaged product:9

   1. (a)

      it must, subject to COB 5.3.8 G - COB 5.3.10 R, be the most suitable from the range of packaged products, on which advice on investments is given to the client as determined by COB 5.1.7 R; and9

   2. (b)

      if there is no packaged product in the firm's relevant range of packaged products which is suitable for the client, no recommendation must be made.9

3. (3)

   In making the recommendation or effecting the transaction in (1), the firm must have regard to:9

   1. (a)

      the facts disclosed by the client; and9

   2. (b)

      other relevant facts about the client of which the firm is, or reasonably should be, aware.9

4. (4)

   A firm which acts as an investment manager for a private customer must take reasonable steps to ensure that the private customer's portfolio or account remains suitable, having regard to the facts disclosed by the private customer and other relevant facts about the private customer of which the firm is or reasonably should be aware.9

5. (5)

   Where, with the agreement of the private customer, a firm has pooled his funds with those of others with a view to taking common discretionary management decisions, the firm must take reasonable steps to ensure that a discretionary transaction is suitable for the fund, having regard to the stated investment objectives of the fund.9

1. (1)

   9A firm when not selecting packaged products from the whole market (and notwithstanding COB 5.3.5 R (2)) may recommend a packaged product outside the range of packaged products on which it provides advice to a particular client if the recommended packaged product is suitable for the client and had it been included would have been at least as suitable as the most suitable packaged product in that range.

2. (2)

   A firm must take reasonable steps to ensure that an appointed representative of a firm only acts as in (1) with its explicit written permission, either generally or in relation to the specific recommendation.

1. (1)

   9A firm which holds itself out as giving personal recommendations to private customers on packaged products from the whole market (or the whole of a sector of that market) must not give any such personal recommendation unless it:

   1. (a)

      has carried out a reasonable analysis of a sufficiently large number of packaged products which are generally available from the market (or sector of the market); and

   2. (b)

      conducts the analysis in (a) on the basis of criteria which reflect adequate knowledge of the packaged products generally available from the market as a whole (or from a relevant sector).

2. (2)

   A firm in (1) must satisfy the obligation in COB 5.3.5 R (2) by taking reasonable steps to ensure that a personal recommendation given to a private customer is:

   1. (a)

      in accordance with its analysis carried out under (1); and

   2. (b)

      is the packaged product which on the basis of that analysis is the most suitable to meet the customer's needs.

1. (1)

   9A firm which holds itself out as giving personal recommendations to intermediate customers or market counterparties on life policies from the whole market (or from a relevant sector) must not give any such personal recommendation unless it:

   1. (a)

      has carried out an analysis of a sufficiently large number of life policies which are generally available from the market (or sector of the market); and

   2. (b)

      conducts the analysis in (a) on the basis of criteria which reflect adequate knowledge of the life policies generally available from the market as a whole (or from a relevant sector).

2. (2)

   A firm in (1) must satisfy the obligation in COB 5.3.5 R (2) by taking reasonable steps to ensure that a personal recommendation given to a client is:

   1. (a)

      in accordance with its analysis carried out under (1); and

   2. (b)

      for a life policy which on the basis of that analysis is suitable to meet the client's needs.

A firm that manages the assets of an occupational pension scheme or stakeholder pension scheme must take reasonable steps to ensure the suitability of specific transactions and of the investment portfolio under management with regard to the investment objectives specified in the portfolio mandate.8

1. (1)

   A firm that gives a personal recommendation, in relation to a life policy, to a person who is a policyholder or a prospective policyholder of a life policy, must provide the person with a suitability letter prior to the conclusion of the contract, unless one of the exceptions in COB 5.3.19 R applies.39

2. (2)

   If, following a personal recommendation by a firm that does not fall within (1), a private customer:9

   1. (a)

      buys, sells, surrenders, converts, cancels, or suspends premiums for or contributions to, a pension contract or a stakeholder pension scheme; or9

   2. (b)

      elects to make income withdrawals; or 9

   3. (c)

      acquires a holding in, or sells all or part of a holding in, a scheme; or9

   4. (d)

      enters into a pension transfer or pension opt-out from an OPS;9

   the firm must provide the customer with a suitability letter, within the time period stipulated by COB 5.3.18 R, unless one of the exceptions in COB 5.3.19 R applies.

The suitability letter in COB 5.3.14 R must:

1. (1)

   explain why the firm has concluded that the transaction is suitable for the customer, having regard to his personal and financial circumstances;

2. (2)

   contain a summary of the main consequences and any possible disadvantages of the transaction;

3. (3)
   1. (a)

      in the case of a personal pension scheme which is not a stakeholder pension scheme, explain the reasons why the firm considers the personal pension scheme to be at least as suitable as a stakeholder pension scheme;

   2. (b)

      in the case of an FSAVC:

      1. (i)

         if the customer has the alternative of a stakeholder pension scheme, explain the reasons why the firm considers the recommended contract to be at least as suitable as a stakeholder pension scheme or as any additional voluntary contribution (AVC) or the facility to make additional contributions to the occupational pension scheme which may be available; or

      2. (ii)

         if the customer does not have the alternative of a stakeholder pension scheme, explain the reasons why the firm considers the recommended contract to be at least as suitable as any AVC or the facility to make additional contributions to the occupational pension scheme which may be available;9

4. (4)

   identify the individual who is authorised by the firm to advise on the type of product that has been recommended;9

5. (5)

   if the recommended product is from a product provider (or if relevant, an undertaking in the immediate group of that provider) which is identified in section 6 of the firm'sinitial disclosure document given in accordance with COB 4.3.3R (1), include the information given in section 6 or in section 6 of the firm's combined initial disclosure document; and9

6. (6)

   in the case of a recommendation by a firm under COB 5.3.8A R (Suitability of packaged products: out-of-range recommendations) explain why it has recommended a packaged product outside the firm'srange of packaged products, including why it is suitable for the customer.9

The firm must provide the letter required by COB 5.3.14 R (2) to the customer:9

1. (1)

   in the case of a pension contract or stakeholder pension scheme, where the cancellation rules require notification of the right to cancel, no later than the fourteenth day after the contract is concluded; or 359

2. (2)

   in any other case, when or as soon as possible after the transaction is effected.

9A firm may provide a statement of demands and needs to the client orally, instead of the suitability letter in COB 5.3.14 R, if:

1. (1)

   the client requests it; or

2. (2)

   immediate cover is necessary;

but in both cases the firm must provide the suitability letter immediately after the conclusion of the contract, on a durable medium.

9If the only contact between the firm and the client before conclusion of the contract is by telephone, the suitability letter must be provided immediately after the conclusion of the contract, on a durable medium.

1. (1)

   9If a firm makes a personal recommendation to an intermediate customer or a market counterparty to take out a life policy, it must explain to the client the reasons for personally recommending that life policy.

2. (2)

   The explanation required under (1) must:

   1. (a)

      take account of the complexity of the life policy proposed; and

   2. (b)

      be provided to the client before the contract is concluded.

COB 5.3.14 R does not apply:

1. (1)

   if the firm is acting as an investment manager for a private customer and makes a personal recommendation relating to a regulated collective investment scheme;

2. (2)

   if the firm is not acting as an outgoing ECA provider, and the customer is habitually resident in another EEA State at the time of acknowledging consent to the proposal form to which the personal recommendation relates;

3. (3)

   if the customer is habitually resident outside the EEA and the customer is not present in the United Kingdom (or EEA in the case of a firm acting as an outgoing ECA provider) at the time of acknowledging consent to the proposal form to which the personal recommendation relates;

4. (4)

   to any personal recommendation by a friendly society for a life policy sold by it with a premium not exceeding £50 a year or, if payable weekly, £1 a week;9

5. (5)

   to any personal recommendation to increase a regular premium to an existing contract; and

6. (6)

   to any personal recommendation to invest additional single premiums or single contributions to an existing packaged product to which a single premium or single contribution has previously been paid.2

3A firm must make and retain a record of a private customer's suitability letter that it has provided in satisfying COB 5.3.14 R. The record must be retained for a minimum period after the letter is provided, as follows:

1. (1)

   for a record relating to a pension transfer, pension opt-out or free-standing additional voluntary contribution (FSAVC), indefinitely;

2. (2)

   for a record relating to a life policy, pension contract or stakeholder pension scheme, six years;

3. (3)

   in any other case, three years.

A firm acting as a broker fund adviser for a private customer must:

1. (1)

   take account of the characteristics of the broker fund, including the charging arrangements, in total, when assessing the suitability of the arrangements;

2. (2)

   review on a regular basis the customer's current investment objectives and strategies relative to those at the time of any previous periodic report to the customer in accordance with COB 8.2.4 R (Requirement for a periodic statement);

3. (3)

   follow up the review with a recommendation in writing to the customer, to be provided at least annually, either to continue with the investment or to withdraw, and in either case to supply reasons for the recommendation;

4. (4)

   provide the customer with an alternative recommendation if the broker fund arrangement is no longer suitable; and

5. (5)

   ensure that any significant change in the investment strategy of the fund, where known to the firm, is notified to the customer in advance together with confirmation why the fund continues to be suitable for the customer's circumstances or an alternative recommendation.

If a personal recommendation about a pension transfer or pension opt-out is to be made on a firm's behalf by an individual who is not one of its pension transfer specialists, the firm must have established procedures for checking:

1. (1)

   the individual's compliance with the firm's procedures;

2. (2)

   the correctness of the application of the transfer value analysis system, where applicable; and

3. (3)

   the merits of the proposed transaction and the suitability of the recommendation;

and any such recommendation must be assessed by one of the firm's designated pension transfer specialists to ensure the procedures have been followed.

1. (1)

   A firm must ensure that a transfer value analysis is carried out in accordance with COB 6.6.87 R - COB 6.6.93 R (Projections) before it makes any recommendation to a customer to transfer out of a defined benefits pension scheme.

2. (2)

   A copy of the analysis must be delivered with the key features document or otherwise provided to the customer before he gives consent to the application to transfer.

3. (3)

   The firm must take reasonable steps to ensure the customer understands the analysis, drawing attention to factors which do and do not support the recommendation to transfer.

A firm must provide a projection of the possible future benefits of the proposed individual pension contract before it makes any personal recommendation to a customer to opt out of, or transfer from, an occupational pension scheme.

1. (1)

   The format and nature of the benefits given in the projection must, so far as possible, be the same as those which apply under the occupational pension scheme of which the customer is, or is eligible to become, a member.

2. (2)

   If it is not possible for the benefits shown in the projection to replicate those of the occupational pension scheme, an explanation must be given.

3. (3)

   If the customer has expressed an interest in changing the structure of his eventual benefits, an additional projection may also be prepared on that basis.

A suitability letter relating to a personal recommendation to opt out of or transfer from an occupational pension scheme must include:

1. (1)

   a summary of the disadvantages as well as the advantages of opting out or transferring; and

2. (2)

   in the case of a pension opt out, a financial analysis explaining the decision to opt-out.

If, contrary to the advice of the firm, a private customer instructs the firm to arrange a pension opt-out or pension transfer, the firm must:

1. (1)

   make and retain a clear record of the firm'sadvice that the private customer should not proceed with the pension opt-out or pension transfer and the private customer's instructions to proceed with the transaction; and

2. (2)

   provide a further confirmation and explanation, in writing, to the private customer that the firm'sadvice is that the private customer should not proceed with the pension opt-out or pension transfer.

[deleted]11

1. (1)

   11Every six months, a firm must notify the FSA, in writing, of the number of pension opt-out and the number of pension transfer transactions which it has arranged during the previous six months. A firm need not make a notification if it has not arranged any such transactions.

2. (1A)

   A firm must also notify the FSA, in writing, at quarterly intervals, of the following details in respect of the preceding quarter:

   1. (a)

      the number of execution-only:

      1. (i)

         pension opt-outs arranged if they exceed 1% of all the firm'spension opt-outs arranged during the quarter; and

      2. (ii)

         pension transfers arranged if they exceed 1% of all the firm'spension transfers arranged during the quarter;

   2. (b)

      thenumber of:

      1. (i)

         pension opt-outs arranged against the firm's advice if they exceed 1% of all the firm'spension opt-outs arranged by the firm during the quarter; and

      2. (ii)

         pension transfers arranged against the firm's advice if they exceed 1% of all the firm's pension transfers arranged by the firm during the quarter; and

   3. (c)

      the number of pension opt outs and the number of pension transfers arranged on a correspondence-only basis by the firm during that quarter.

3. (1B)

   A firm must provide the information required by (1) and (1A) as soon as reasonably practicable after the end of the period.

4. (2)

   A firm must make records of the notifications required by (1) and (1A) and retain them indefinitely.4

A firm must keep separate records for each private customer of every pension transfer, pension opt-out or free-standing additional voluntary contribution (FSAVC) which it has arranged, whether advised or not, and retain these records indefinitely.

When a firm promotes a personal pension scheme including a group personal pension scheme, by means of a direct offer financial promotion to a group of employees, the firm must;

1. (1)

   be satisfied on reasonable grounds that the pension scheme is likely to be at least as suitable for the majority of the employees as a stakeholder pension scheme;

2. (2)

   record why it thinks the promotion is justified; and

3. (3)

   retain the record for a minimum period of six years after the financial promotion is last communicated.3

This section applies to a firm that conducts designated investment business with or for a private customer

A firm must not:

1. (1)

   make a personal recommendation of a transaction; or

2. (2)

   act as a discretionary investment manager; or

3. (3)

   arrange (bring about) or execute a deal in a warrant or derivative; or

4. (4)

   engage in stock lending activity;

with, to or for a private customer unless it has taken reasonable steps to ensure that the private customer understands the nature of the risks involved.1

1. (1)

   This section applies to a firm that conducts designated investment business with or for a private customer.

2. (2)

   This section does not apply when a firmcommunicates or approves a financial promotion.

When it conducts designated investment business, a firm must take reasonable steps to ensure that a private customer is given adequate information about:

1. (1)

   the identity and business address of the firm and any relevant agent of the firm;

2. (2)

   the identity and status, or relationship with the firm, of employees and other agents with whom the customer may have contact; and

3. (3)

   the firm's statutory status (in accordance with GEN 4 Annex 1 (Statutory status disclosure));1

unless the private customer has been given the information on a previous occasion and that information is still up to date.

1. (1)

   A firm must not conduct designated investment business:

   1. (a)

      from an office of its own (or of any appointed representative) outside the United Kingdom;

   2. (b)

      with or for a private customer who is in the United Kingdom;

   unless it has, where relevant, made a disclosure in accordance with (2) to the private customer.

2. (2)

   The required disclosure in (1) means a written statement making it clear that in some or all respects the regulatory system applying, including any compensation arrangements, will be different from that of the United Kingdom. The statement may also indicate the protections or compensation available under another system of regulation.

3. (3)

   A firm must not make an introduction or make arrangements or give advice on investments with a view to another person conducting designated investment business;

   1. (a)

      from an office outside the United Kingdom;

   2. (b)

      with or for a private customer (or a person who, if a client, would be a private customer), who is in the United Kingdom;

   unless the firm has, where relevant, made a disclosure in accordance with (2) and there are no reasonable grounds for the firm to doubt that the private customer will be dealt with in an honest and reliable way.1

1An ISD investment firm providing or offering to provide a core investment service or custody must make available to every client, who has used or intends to use those services, information on whether or not compensation may be available from the compensation scheme or a compensation scheme established in another EEA State in accordance with the Investor Compensation Directive should the firm be unable to meet its liabilities, and the extent and level of cover and how further information can be obtained.2

1Information about compensation arrangements made available by an ISD investment firm under COB 5.5.9 Rmust:

1. (1)

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

2. (2)

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

This section applies to a firm that makes a charge to a private customer in the course of, or in connection with its designated investment business.

A firm must ensure that its charges to a private customer made in connection with the conduct of designated investment business are not excessive.

When a firm's charges for advising on or managing a private customer's assets are dependent on the value of designated investments that are not readily realisable investments, the valuation of those designated investments must be based upon the price likely to be agreed between a willing buyer and a willing seller dealing at arm's length who are both in possession of all freely available information concerning those investments.

This section applies to a firm that conducts designated investment business with or for a private customer.

1. (1)

   Before a firm conducts designated investment business with or for a private customer, the firm must disclose in writing to that private customer the basis or amount of its charges for conducting that business and the nature or amount of any other income receivable by it or, to its knowledge, by its associate and attributable to that business.

2. (2)

   If the designated investment business in (1) is in respect of an execution-only transaction:

   1. (a)

      which does not relate to a packaged product; and

   2. (b)

      where prior written disclosure would delay the transaction;

   the firm may instead:

   1. (c)

      make the disclosure required by (1) orally before the transaction is executed; and

   2. (d)

      provide written confirmation of the matters disclosed to the private customer within five business days of the execution.2

1. (1)

   4When a firm sells, personally recommends or arranges the sale of a packaged product to a private customer, and subsequently on the request of a private customer, the firm must disclose to the private customer, in cash terms:

   1. (a)

      any commission equivalent payable by it to a representative or appointed representative; and

   2. (b)

      any commission or commission equivalent receivable by it, or by any of its associates in connection with the transaction

   unless COB 5.7.9 R or COB 5.7.10 R applies.

2. (2)

   In (1)(b) a firm is, in respect of any transaction, to be regarded as receiving commission equivalent if:

   1. (a)

      it is received from a product provider ("P"), or an associate of P; and

   2. (b)

      either P or its associate is in the same immediate group as the firm; and

   3. (c)

      the value of the commission equivalent (as assessed in accordance with these rules) is greater than the amount of commission in cash terms.

3. (3)

   In (1) and (2) "cash terms" in relation to commission does not include the value of any indirect benefits which the firm may receive in accordance with COB 2.2.1

In determining the amount to be disclosed as commission equivalent in accordance with COB 5.7.5 R, a firm must put a proper value on the cash payments, benefits and services provided to its representatives in connection with the transaction.4

COB 5.7.5 R does not apply if:

1. (1)

   the firm is acting as an investment manager; or

2. (2)

   the firm is not acting as an outgoing ECA provider and the transaction is effected for a private customer who is habitually resident overseas; or

3. (3)

   the firm is not acting as an outgoing ECA provider and the packaged product is a life policy and the private customer is not present in the United Kingdom at the time the application is made; or

4. (4)

   the firm is acting as an outgoing ECA provider and the transaction is effected for a private customer who is habitually resident outside the EEA; or

5. (5)

   the firm is acting as an outgoing ECA provider, the packaged product is a life policy and the private customer is not present in the EEA at the time the application is made.3

The requirement in COB 5.7.5 R to disclose to a private customer the amount or value, in cash terms, of commission or equivalent does not apply if the firm provides the private customer with example key features, in accordance with COB 6.2.7 R (Life policies) andCOB 6.2.22 R (Schemes), provided that the firm discloses to the private customer the actual amount or value of commission or equivalent within five business days of effecting the transaction.4

If the terms of a packaged product are varied in circumstances that require the issue of a cancellation notice, a firm must disclose to a private customer in writing any consequent increase in commission or equivalent receivable by it in relation to that transaction.4

This section applies to a firm that provides information about stakeholderpension schemes at a meeting arranged for a group of employees.

When a firm provides information about stakeholderpension schemes to a group of five or more employees at a meeting which has been sponsored by one or more employers, that information must be given by an adviser appointed by the firm to give advice to private customers on packaged products.

COB 5.9.2 R does not apply to a firm that provides information about stakeholderpension schemes to a group of four or less employees at a meeting.

1This section applies to a firm that conducts corporate finance business.