COB 6.2 Provisions of key features or simplified prospectus8

COB 6.2 applies to a firm in accordance with COB 6.1.1 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

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 6.2.7 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

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

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

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

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.

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 6.2.16 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

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

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

1. (1)

   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 R to COB 6.4.31 R (telephone sales and other exemptions) applies, the private customer must be provided with appropriate key features for the scheme before he completes an application for the scheme holding.8

2. (2)

   (1) does not apply where the operator of the scheme has elected that the scheme will comply with COB 6.2.26 R to instead of the provisions in COB 6 that relate to key features.8

3. (3)

   (2) does not apply to an investment trust.8

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.83

   8

3[Deleted]

3[Deleted]27

1. (1)

   An operator of a simplified prospectus scheme must, for each simplified prospectus scheme in respect of which it is the operator, produce and publish a simplified prospectus in accordance with the rules in this section and ensure that it contains in summary form each of the matters referred to in COB 6.2.37 R.

   28
2. (2)

   A simplified prospectus must be incorporated in a written document or in any durable medium.

3. (3)

   An operator of a simplified prospectus scheme must be satisfied on reasonable grounds that each simplified prospectus which it produces:

   1. (a)

      includes all such information as is necessary to enable an investor to make an informed decision about whether to acquire units in the scheme;

   2. (b)

      does not omit any key item of information;

   3. (c)

      wherever possible is written in plain language which avoids technical language and jargon; and

   4. (d)

      adopts a format and style of presentation which is clear and attractive to the average reader, so that it can be easily understood by him.

4. (4)

   The simplified prospectus may be attached to the full prospectus as a removable part of it.

5. (5)

   Where the simplified prospectus scheme is an umbrella or has more than one class of units, the operator may at its option produce and publish either a composite simplified prospectus covering all the sub-funds that comprise the umbrella or all the classes of units, as applicable, or a separate simplified prospectus for each sub-fund comprising the umbrella or for each class of units, as the case may be.

6. (6)

   Where in accordance with (5) an operator produces and publishes separate simplified prospectuses for the sub-funds of an umbrella or, as the case may be, for each class of units, references in COB 6.2.26 R to COB 6.2.45 R to "scheme" or "simplified prospectus scheme" should be taken as referring to the relevant sub-fund or class, as applicable.

8An operator of a simplified prospectus scheme must, for each simplified prospectus scheme of which it is the operator, keep its simplified prospectus up-to-date and must revise it immediately on the occurrence of any material change.

8A UCITS management company must for each UCITS scheme it manages file the scheme's initial simplified prospectus, together with each revision to it, with:

1. (1)

   the FSA; and

2. (2)

   the competent authority of each EEA state in which its units are to be marketed in the exercise of an EEA right.

1. (1)

   8A UCITS management company must for each UCITS scheme it manages and in respect of which it is marketing units in another EEA State in the exercise of an EEA right, produce a simplified prospectus for the scheme drawn up in accordance with the requirements contained in this section.

2. (2)

   The simplified prospectus must be drawn up in the, or one of the, official languages of the EEA State for which it was prepared or in a language approved by the competent authority of that State.

3. (3)

   The simplified prospectus may, without alteration, be used for marketing purposes in the EEA State for which it was prepared and in which the units of the simplified prospectus scheme are to be sold.

1. (1)

   8When a firm sells, personally recommends or arranges (brings about) for the sale of a simplified prospectus scheme, it must offer the scheme's up-to-date simplified prospectus free of charge to any person who may become a subscriber to the scheme before a contract for the sale of units is concluded.

2. (2)

   The requirement in (1) will be met by a firm in relation to a private customer if it or any other firm provides him with a copy of the simplified prospectus in accordance with COB 6.2.33 R (1).

1. (1)

   8When a firm sells, personally recommends or arranges (brings about) for the sale of a simplified prospectus scheme to a private customer in the United Kingdom, the firm must provide him with the up-to-date simplified prospectus for the scheme before he completes an application for the scheme holding unless COB 6.2.35 R or COB 6.2.36 R or COB 6.4.27 R to COB 6.4.31 R (telephone sales and other exemptions) apply.

2. (2)

   (1) does not apply to a UCITS management company when it sells units in a UCITS scheme without personally recommending or arranging for the sale of such units.

8A firm need not, unless a private customer specifically requests it, provide a simplified prospectus to a private customer for a simplified prospectus 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 on the personal recommendation of, or arranged to be sold by another person, provided that other person:

   1. (a)

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

   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; or

2. (2)

   at the time the private customer 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 the private customer in the course of an execution-only transaction; or

4. (4)

   the scheme holding is purchased on behalf of the 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 the simplified prospectus 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 scheme in which he already has a scheme holding and has already been provided with the up-to-date simplified prospectus which covers the purchase; or

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 the up-to-date simplified prospectus of the scheme which covers the transfer.

1. (1)

   8A firm to which COB 6.2.33 R (Obligation on a firm to provide a simplified prospectus) applies thatis offering a funds supermarket service, need not, unless a private customer requests it, provide a private customer with a simplified prospectus for any simplified prospectus scheme to which its funds supermarket service relates provided it complies with the condition in (2).

2. (2)

   The condition is that the firm must instead provide the private customer with a composite key features document that meets the requirements of COB 6.5 (Content of key features) which covers each of the key features schemes and simplified prospectus schemes to which its funds supermarket service relates.

1. (1)

   8In disclosing the information required by paragraph (14) of COB 6.2.37 R (Table: Contents of the simplified prospectus), a firm should set out the information in the format required by, and include the contents of, COB 6.5.30 R (Table for schemes) to COB 6.5.35 R (Calculation method for "effect of charges to date" for schemes) and COB 6.5.38 R (Commission and commission equivalent for life policies, schemes and stakeholder pension schemes), as if such provisions applied to simplified prospectus schemes, as modified by COB 6.2.39 R (Table).

2. (2)

   Where the units of a simplified prospectus scheme are to be marketed and sold in another EEA State, the operator of the scheme need not comply with the requirements in (1) for the simplified prospectus that is to be used to market the scheme in that EEA State.

3. (3)

   Note 3 to paragraph (14) of COB 6.2.37 R (Table: Contents of the simplified prospectus) and COB 6.2.38 R to COB 6.2.40 G cease to have effect on 30 June 2009, unless re-made.

8When a firm sells, personally recommends or arranges (brings about) for the sale of a simplified prospectus scheme to a retail customer in circumstances where a distance contract is being concluded, it must ensure that the retail customer is provided in good time with all the contractual terms and conditions and the information in COB App 1.1 before the contract for the scheme holding is concluded.

1. (1)

   8When a firm sells, personally recommends or arranges for the sale of a simplified prospectus scheme to a private customer and the proposed transaction is for a scheme:

   1. (a)

      which relates to an election to make income withdrawals; or

   2. (b)

      where the private customer's primary objective is to acquire:

      1. (i)

         a specified sum of money on a specified date; or

      2. (ii)

         a specified sum of money on death; or

      3. (iii)

         an annuity of a specified amount payable as from a specified date;

   the firm must provide the private customer with a projection, illustrating how the principal terms of the proposed transaction apply to him.

2. (2)

   (1) does not apply to a UCITS management company when it sells units in a UCITS scheme without personally recommending or arranging for the sale of such units.

3. (3)

   (1) does not apply to a direct offer financial promotion in relation to units in a simplified prospectus scheme.

1. (1)

   8When a firm sells, personally recommends or arranges for the sale of a unit in a simplified prospectus scheme to a private customer which is to be held within a PEP or ISA, it must provide him with the following additional information:

   1. (a)

      a description of the nature of the services the firm will provide for the private customer in relation to the PEP or ISA;

   2. (b)

      [deleted]8

   3. (c)

      [deleted]8

   4. (d)

      a statement that the favourable tax treatment of ISAs may not be maintained;

   5. (e)

      how and when statements (if any) will be sent;

   6. (f)

      an explanation how the ISA or plan may be terminated or transferred to another ISA or PEP manager;

   7. (g)

      whether the ISA is a mini or maxi-ISA agreement and an explanation of the differences between the two; and

   8. (h)

      whether the private customer has a choice to reinvest income, where uninvested money will be held and whether interest is paid on such money.

2. (2)

   (1) does not apply to a UCITS management company when it sells units in a UCITS scheme without personally recommending or arranging for the sale of such units.

3. (3)

   (1) does not apply to the extent that a private customer is making a purchase of a scheme holding in a simplified prospectus scheme in which he already has a scheme holding and has already been provided with the information set out at (1)(a) to (h) which remains up-to-date.

1. (1)

   8When a firm sells, personally recommends or arranges (brings about) 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)

      the scheme'ssimplified prospectus9 has been sent to 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 sent to the FSA.

8If the sale in COB 6.2.46 R (1) is by way of a distance contract, to a retail customer, the firm must provide all the contractual terms and conditions and the information in COB App 1.1.