Content Options:

Content Options

View Options:

COB 6.2 Provision of key features

Application

COB 6.2.1 R

COB 6.2 applies to a firm in accordance with COB 6.1.1 R.

Medium for provision of key features3

COB 6.2.2 R

The key features or information which the rules in COB 6.2, COB 6.2 and COB 6.4 require a firm to provide to a private customer in relation to a packaged product, cash deposit ISA or cash deposit CTF must be provided by the firm in a durable medium.356

COB 6.2.3 G

For detailed guidance on electronic provision please refer to COB 1.8 (Application to electronic media) and COB 3.14 (The internet and other electronic media).

COB 6.2.4 G

Firms are reminded that any key features or other information required by COB 6.4 - COB 6.5 is a form of financial promotion and therefore the financial promotion rules contained in COB 3 apply (subject to the application provisions in COB 3.1 to COB 3.3).3

COB 6.2.5 G

COB 3.7 requires a firm to keep records of non-real time financial promotions to private customers for certain periods of time. These periods are: indefinitely for a record relevant to a pension transfer or pension opt out; six years for a record relevant to a life policy, pension contract or stakeholder pension scheme; and three years in any other case.

COB 6.2.5A G

Where this chapter requires key features or other information to be given, it does not require the same information to be provided again if the private customer already has it.3

Life policies

COB 6.2.6 G

COB 6.2.7 R - COB 6.2.18 R are disapplied by COB 6.2.21 R in relation to certain customers resident outside the United Kingdom.

COB 6.2.7 R

When a firm sells, personally recommends or arranges the sale of a life policy to a private customer, the private customer must be provided with appropriate key features before the private customer completes an application for the policy, subject to COB 6.2.9 R (Sales through intermediaries) and COB 6.4.27 R to COB 6.4.31 R5 (telephone sales3 and other exemptions).5

COB 6.2.8 G

Where a private customer has responded to a direct offer financial promotion, the mailing package or financial promotion will have included example-based key features - there is no requirement to provide a further set of key features to such a private customer in respect of the same transaction.

3Exception for life policies: sales through intermediaries

COB 6.2.9 R

COB 6.2.7 R does not apply to a product provider when its life policy is sold on the personal recommendation of, or arranged to be sold by, another person, provided that other person:3

  1. (1)

    is a firm (or appointed representative) operating from an establishment maintained by the firm (or appointed representative) in the United Kingdom; or3

  2. (2)

    is operating from an establishment in an EEA State whose law imposes an obligation on the person to provide information about the life policy in accordance with articles 3 and 5(1) and (2) of the Distance Marketing Directive.37

COB 6.2.10 G

3[Deleted]

COB 6.2.11 G

3[Deleted]7

Life policies: pre-completion variations

COB 6.2.12 R
  1. (1)

    Where key features have already been provided by a firm to a private customer in accordance with COB 6.2.7 and the terms for the proposed life policy are subsequently altered before the private customer completes an application form, the firm must ensure that the private customer is provided with revised key features, unless the alteration is one or more of the following:3

    1. (a)

      the amount of the premium is changed;3

    2. (b)

      the amount of any commission or remuneration payable is reduced;3

    3. (c)

      a rider benefit is added, removed or amended.3

  2. (2)

    If (1)(a) to (c) apply, then, subject to COB 6.4.27 to COB 6.4.31 (telephone sales and other exemptions), if the contract is to be a distance contract with a retail customer, the retail customer must be provided with details of such changes in a durable medium in good time before the contract is concluded.35

COB 6.2.13 G

COB 6.2.12 R is intended to allow simple changes to be made before a private customer commits himself without further packaged product disclosure information being provided. Changes in the amount of premium alone, of whatever size, will not require revised key features if the underlying purpose of the proposed contract is unchanged. So, for example, an increase in the proposed regular premium for a personal pension policy, will not require revised key features; nor will a change in premium and sum assured under a mortgage policy if the loan has to be increased before the house sale is finalised. However, changes to the type of packaged product or the underlying purpose would require revised key features - examples being a change from regular to single premiums under a personal pension policy, or a change from maximum life cover to balanced or standard protection under a flexible whole-life policy, with or without a change in premium. Revised key features would be required where the rate or basis of commission or remuneration was increased, but not where the amount increased simply because of a change in premium.

COB 6.2.14 R

Where key features have already been provided to a private customer by a firm, and the terms of the proposed life policy are materially altered after the private customer completes an application form, the private customer must be provided with details of the change in a durable medium as soon as practicable and offered revised key features.3

COB 6.2.15 G

What constitutes 'materially altered' requires consideration of the facts in the circumstances of each case. Changes which lead to an increase in the proposed premium of 25 per cent or less can be regarded as not material and can be ignored, so long as the underlying policy terms and conditions are the same. Other changes to the terms of the proposed contract, such as an increase in the rate or basis of commission, a different charges structure or an extension of the policy term should be regarded as material.3

Variations to existing life policies

COB 6.2.16 R

When a policyholder applies to vary a life policy issued on or after 1 January 1995 (or is recommended to do so) and the variation of the policy gives rise to a right to cancel under COB 6.7.7 R, the policy holder must be provided with:3

  1. (1)

    the information required by COB 6.5.15 R to COB 6.5.19 R, COB 6.5.23 R to COB 6.5.25 R, COB 6.5.27 R to COB 6.5.28 R and COB 6.5.38 R; and3

  2. (2)

    in the case of a variation which results in a new distance contract, all the contractual terms and conditions and the information in COB App 1;3

in a durable medium by the firm personally recommending, arranging or effecting the variation in good time before it is put into effect, unless COB 6.2.19 R (sales through intermediaries) or COB 6.4.27 R to COB 6.4.31 R (telephone sales and other exemptions) applies.35

COB 6.2.16A R
  1. (1)

    4When a long-term care insurance contract which is

    1. (a)

      not a pure protection contract and which was issued on or after 1 January 1995; or

    2. (b)

      a pure protection contract and which was issued on or after 31 October 2004;

    is varied so as to bring into effect provisions for long-term care benefits, the firm must provide the private customer with appropriate key features in good time sufficient to enable the private customer to consider them before the variation takes effect.

  2. (2)

    If the circumstances of the variation, whether by the exercise of an option or otherwise, make it impossible to provide the key features before the variation takes effect, the firm must do so as soon as possible afterwards.

COB 6.2.17 G

Key features were introduced for new policies sold from 1 January 1995. One way of meeting the requirements of COB 6.2.16 R is by providing a complete set of new key features to the policyholder.3

COB 6.2.18 R
  1. (1)

    4When a policyholder applies to vary:4

    1. (a)

      a life policy issued before 1 January 1995; or4

    2. (b)

      a pure protection contract issued before 31 October 2004 and which would after 30 October 2004 be a long-term care insurance contract;4

    (or is personally recommended to do so) and the variation of the policy gives rise to a right to cancel under COB 6.7.7 R, information must be given to the policyholder by the firm that is personally recommending, arranging or effecting the variation before it is put into effect, unless COB 6.2.19 R or COB 6.4.27 R to COB 6.4.31 R (telephone sales and other exemptions) applies.

  2. (2)

    When giving the information in (1), the firm must:35

    1. (a)

      believe on reasonable grounds that the information given is sufficient to enable the policyholder to understand the consequences of the variation; and3

    2. (b)

      in the case of a variation which results in a new distance contract, in good time before the variation is put into effect, provide all the contractual terms and conditions and the information in COB App 1.3

COB 6.2.19 R

COB 6.2.16 R and COB 6.2.18 R do not apply to a product provider when the variation to its life policy is effected on the personal recommendation of or arranged by another person, provided that other person:3

  1. (1)

    is a firm (or appointed representative) operating from an establishment maintained by the firm (or appointed representative) in the United Kingdom; or3

  2. (2)

    is operating from an establishment in an EEA State whose law imposes an obligation on the person to provide information about the variation to the life policy in accordance with articles 3 and 5(1) and (2) of the Distance Marketing Directive.37

COB 6.2.20 G

3[Deleted]

Exception for life policies: non-UK customers3

COB 6.2.21 R

There is no requirement for key features to be provided for a new life policy or a variation to an existing policy if, at the time that the private customer signs the application, he is habitually resident:3

  1. (1)

    (except for distance contracts with retail customers) in an EEA State other than the United Kingdom; or3

  2. (2)

    outside the EEA and he is not present in the United Kingdom.13

6Exceptions for life policies: variations held within a CTF

COB 6.2.21A R

COB 6.2.7 does not apply to a CTF provider in relation to a variation to an existing policy held within a CTF, if:

  1. (1)

    the terms and conditions, including all charges, are the same as applied at the time of the purchase, or the most recent purchase or payment, of the existing policy; and

  2. (2)

    key features outlining those terms and conditions were issued to the customer in respect of that previous purchase.6

Provision of key features: schemes7

COB 6.2.22 R

When a firm sells, personally recommends or arranges for the sale of a scheme to a private customer, unless COB 6.2.24 R (exceptions) or COB 6.4.27 to COB 6.4.31 R (telephone sales and other exemptions) applies, the private customer must be provided with key features for the scheme before the private customer completes an application for the scheme holding.35

COB 6.2.23 G
  1. (1)

    COB 6.2.22 R applies not just to new purchases but also to any recommendation or application to transfer the value of a particular fund holding within a scheme to a different fund within the same scheme.

  2. (2)

    Where a private customer has responded to a direct offer financial promotion, the mailing package or direct offer financial promotion should have included example-based key features - there is no requirement to provide a further set of key features to such a private customer in respect of the same transaction.37

Exceptions from the requirement to provide key features for schemes

COB 6.2.24 R

A firm need not provide key features to a private customer in respect of a scheme if:

  1. (1)

    the firm is a product provider and the scheme holding is sold on the personal recommendation of, or arranged to be sold by another person, provided that other person:3

    1. (a)

      is a firm (or appointed representative) operating from an establishment maintained by the firm (or appointed representative) in the United Kingdom; or3

    2. (b)

      is operating from an establishment in an EEA State whose law imposes obligations on the person to provide information about the scheme holding in accordance with articles 3 and 5(1) and (2) of the Distance Marketing Directive; or3

  2. (2)

    at the time he signs the application, the private customer is habitually resident outside the EEA and is not present in the United Kingdom; or

  3. (3)

    (except for distance contracts with retail customers) the scheme holding is purchased by a private customer on an execution-only basis; or3

  4. (4)

    the scheme holding is purchased on behalf of a private customer by an investment manager exercising discretion; or

  5. (5)

    the sale of the scheme holding is arranged or recommended by an investment manager who is not exercising discretion and the private customer has agreed, either in relation to that specific holding or generally, that key features need not be provided; or

  6. (6)

    a private customer is making a purchase of a scheme holding (whether or not held within a CTF) in a fund in which he already has a scheme holding and has already been provided with appropriate key features covering the purchase; or36

  7. (7)

    a private customer is transferring from accumulation units to income units of the same scheme (or vice versa) and has already been supplied with key features which cover the transfer; or3

  8. (8)

    the scheme is a UCITS scheme recognised under section 264 of the Act (Schemes constituted in other EEA States); however, if the sale is by way of a distance contract, the firm must provide all the contractual terms and conditions and the information in COB App 1 instead of key features.23

COB 6.2.24A R

3[Deleted]

COB 6.2.25 R

3[Deleted]27

Requirement to offer a simplified prospectus for section 264 schemes

COB 6.2.26 R
  1. (1)

    2When a firm sells, personally recommends or arranges for the sale of a UCITS scheme which is a recognised scheme under section 264 of the Act (Schemes constituted in other EEA States) to a client, it must offer the client free of charge a copy of the scheme's most recent simplified prospectus before an application for the scheme holding is completed.

  2. (2)

    The simplified prospectus must meet the requirements of the UCITS Directive necessary for the scheme to enjoy the rights conferred by the Directive.

  3. (3)

    When the scheme holding is purchased on behalf of a client by an investment manager exercising discretion, the requirement in (1) will be satisfied by the investment manager being offered the simplified prospectus free of charge before the application form for a scheme holding is completed.

  4. (4)

    A firm must not carry on any of the activities referred to in (1) in relation to a UCITS scheme which is a recognised scheme under section 264 of the Act unless it is satisfied on reasonable grounds that:

    1. (a)

      a copy of the scheme's simplified prospectus has been filed with the FSA before any units in the scheme are marketed in the UK; and

    2. (b)

      the information contained in the simplified prospectus is up to date and is not in need of revision;

    and that any subsequent amendments thereto have been filed with the FSA.