COB 6.4 Product disclosure: special situations

COB 6.4 applies to a firm in accordance with COB 6.1.1 R, in respect of occupational pension schemes, self invested personal pension schemes, income withdrawals and short-term annuities7, cash deposit ISAs, cash deposit CTFs, Revenue allocated CTFs, traded life policies, stakeholder pension schemes, packaged products, other deposits and long-term care insurance contracts.124

1. (1)

   When a firm sells, personally recommends or arranges the sale of a new group or master life policy, the first in a series of individual life policies or the first units in a particular key features scheme5 or simplified prospectus scheme5 to or for the trustees of a money-purchase occupational scheme, it must provide the trustees with key features, in accordance with COB 6.2.7 R to COB 6.2.25 R or for a simplified prospectus scheme, with a simplified prospectus, in accordance with COB 6.2.26 R to COB 6.2.45 R5.

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2. (2)

   In COB 6.2 to COB 6.5, for the purposes of (1), the firm must treat the trustees as private customers.

3. (3)

   In addition to the information to be provided to trustees under COB 6.4.4 R (1), the firm must ensure that key features or the simplified prospectus5 are made available to the trustees to distribute to all scheme members at the outset of the scheme and for subsequent new members.

4. (4)

   The requirement in COB 6.4.4 R (3) applies to main scheme benefits and to additional voluntary contributions where members' benefits are linked to earmarked segments of life policies or schemes. It does not apply where trustees make pooled investments and make their own arrangements for allocation of investment returns to determine members' benefits, whether attached to defined benefit pension schemes or money purchase occupational scheme.

1. (1)

   A firm which sells, personally recommends or arranges the sale of a packaged product (other than a simplified prospectus scheme5) to or for a member, prospective member or trustees of a self-invested personal pension scheme, must provide key features to that member or trustees,in accordance with COB 6.2.7 R to COB 6.2.25 R or for the sale of a simplified prospectus scheme, provide a simplified prospectus to that member or trustees, in accordance with COB 6.2.26 R to COB 6.2.45 R5.

2. (2)

   In COB 6.2 to COB 6.5, for the purposes of (1), members, prospective members and trustees must be treated by the firm as private customers.

When a firm personally recommends, arranges or effects income withdrawals or purchase of short-term annuities7 to or for a private customer, the customer must be provided with key features or with a simplified prospectus5 in good time before he signs any form of application or authority electing to make those withdrawals or purchases7, whether that election 7or purchase is made with advice on investments or on an execution-only basis, unless COB 6.4.10 R to COB 6.4.12 R or COB 6.4.27 R to COB 6.4.31 R (telephone sales and other exemptions) applies.13

In relation to an election to make income withdrawals, or short-term annuities,7 the requirement for the provision of key features or a simplified prospectus5 in:

1. (1)

   COB 6.2.7 R also applies when an existing life policy is to be endorsed;

2. (2)

   COB 6.2.22 R or, for simplified prospectus schemes, COB 6.2.33 R also applies when an existing scheme holding is to be used.

In relation to an election to make income withdrawals, or purchase of short-term annuities,7 the requirements of COB 6.4.11 R and COB 6.4.12 R override the relevant requirement in COB 6.2 (Provision of key features or simplified prospectus5), where there is conflict, but only where this would not contravene a requirement of the UCITS Directive5.

When a private customer makes a series of elections within a period of 12 months to make income withdrawals,7 or purchase of short-term annuities, the firm that is personally recommending, arranging or effecting the elections may provide one combined set of key features, or simplified prospectuses5 for those elections, or may provide separate sets of key features for elections which relate to life policies and key features schemes5 or separate simplified prospectuses for simplified prospectus schemes5.

Where income is being taken, no less than six weeks before the end of the annuity period for a short-term annuity or at intervals no longer than 12 months from the date of an election by a private customer to make income withdrawals the product provider of the unvested pension scheme must:7

1. (1)

   provide the private customer with such information required by COB 6.6.13 R as will enable the private customer to review the options available7; and

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2. (2)

   inform the private customer how to obtain advice on investments in respect of his unsecured or alternatively secured pension7, and that it would be in his best interests to do so.

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When a firm manages, personally recommends or sells a cash deposit ISA or cash deposit CTF to a private customer, that customer must be provided with the information specified in whichever of COB 6.5.42 R or COB 6.5.42A R applies to it in good time before the customer is bound by the transaction, unless COB 6.4.27 R to COB 6.4.31 R (telephone sales and other exemptions) applies.134

When a firm personally recommends that a private customer should purchase a traded life policy, the customer need not be provided with key features, if the firm instead supplies the information in COB 6.5.44 R in good time before the customer is asked to complete any form of application or authority giving effect to the purchase of the traded life policy.1

When a firm sells, manages, personally recommends or arranges the sale of a stakeholder pension scheme to or for a private customer, the firm must, subject to COB 6.4.18 R and unless COB 6.4.27 R to 6COB 6.4.31A R6 (telephone sales and other exemptions) applies, provide the private customer with key features or a simplified prospectus5 before the private customer completes an application for the stakeholder pension scheme.3

When a firm proposes to deal with a private customer on the telephone for the purposes of providing information through a decision tree about stakeholder pension schemes, the firm may do so only if it has adequate evidence to show that the private customer has access to a copy of a decision tree (as specified in COB 6.5.8 R) during the conversation.

COB 6.4.15 R does not apply to a stakeholder pension scheme operator when its stakeholder pension scheme is sold on the personal recommendation of, or arranged to be sold by, another person, provided that other person:1

1. (1)

   is a firm (or an appointed representative) operating from an establishment maintained by the firm (or appointed representative) in the United Kingdom; or1

2. (2)

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

1. (1)

   When a firm sells, personally recommends or arranges the sale of a new group or master life policy, the first in a series of individual life policies or the first units in a particular key features scheme5 or simplified prospectus scheme5 to the trustees or the operator of a stakeholder pension scheme, it must provide the trustees or operator with key features, in accordance with COB 6.2.7 R to COB 6.2.25 R or for a simplified prospectus scheme, with a simplified prospectus, in accordance with COB 6.2.26 R to COB 6.2.45 R5.

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2. (2)

   In COB 6.2 to COB 6.5, for the purposes of (1), the firm must treat trustees and operators as private customers.1

When a firm provides a private customer with information through a decision tree concerning membership of a stakeholder pension scheme, but does not give advice on investments or make a personal recommendation, the firm must provide the private customer with a written notice in accordance with COB 6.4.22 R and COB 6.4.23 R.

A written notice required by COB 6.4.21 R must be provided by the firm no later than 8 business days after the cancellation period commences.1

The notice in COB 6.4.22 R must:

1. (1)

   confirm that no advice on investment has been given and that the private customer has decided that the stakeholder pension scheme is appropriate as a result of the answers he has given to the questions posed in the decision tree; and

2. (2)

   include a copy of the decision tree indicating the answers which the private customer has given.

1. (1)

   1A retail customer must be provided with all the contractual terms and conditions and the information in COB App 1 in a durable medium in good time before he is bound by a distance contract or offer under which the firm will accept deposits (other than a cash deposit ISA, for which see COB 6.5.42 R), unless an exemption in COB 6.4.27 R to COB 6.4.31 R (telephone sales and other exemptions) applies.3

1. (1)

   1Where this chapter requires key features, a simplified prospectus5 or other information to be provided, in the case of voice telephony communications, a firm:

   1. (a)

      must provide the customer at the beginning of the telephone conversation with the name of the firm and (if the call is initiated by the firm) the commercial purpose of the call;4

   2. (b)

      provided the customer gives his explicit consent to receiving only limited information, may proceed on the basis of at least the following information:3

      1. (i)

         the name of the person in contact with the customer and his link with the firm;

      2. (ii)

         a description of the main characteristics of the service;

      3. (iii)

         the total price to be paid by the customer to the firm for the service, including all related fees, charges and expenses, and all taxes paid through the firm together with a statement, where relevant, that commission or remuneration will be paid to the adviser or representative, or, where an exact price cannot be indicated, the basis for the calculation of the price enabling the customer to verify it;

      4. (iv)

         where relevant, notice of the possibility that other taxes or costs may exist that are not paid through the firm or imposed by it;

      5. (v)

         the existence or absence of a right to cancel the service under COB 6.7 and, where there is such a right, its duration and the conditions for exercising it, including information on the amount which the customer may be required to pay if the contract is terminated early or unilaterally under its terms, as well as the consequences of not exercising it; and

      6. (vi)

         that other information is available on request, and the nature of that information, and4

      7. (vii)

         in addition to (a) and (b) above, where the product is a CTF, provided the customer gives his explicit consent to receiving only limited information, may proceed on the basis of the information referred to in COB 6.5.40 R (7) given orally.4

2. (2)

   If the customer does not give his explicit consent to receiving limited information, and the parties wish to proceed by telephone, the firm must prior to the conclusion of the contract provide all of the information required by COB App 1 orally to the customer.3

3. (3)

   In the case of either (1) or (2), the firm must send the private customer immediately after the contract is concluded, the required key features, simplified prospectus5 or other information (as applicable) in a durable medium.

3This exemption applies where this chapter requires a key features, simplified prospectus5 or other information to be provided in relation to a distance contract, if the distance contract is concluded at the customer's request using a means of distance communication (other than telephone) which does not enable provision of the information in a durable medium before the customer is bound by the contract or offer. In that case, the firm must provide key features, simplified prospectus5 or other information to the customer in a durable medium immediately after the conclusion of the contract.2

This exemption applies where this chapter requires a key features, simplified prospectus5 or other information to be provided in relation to a distance contract, if the firm has an initial service agreement with the customer and the contract is in relation to a successive operation or a separate operation of the same nature under that agreement (see COB 1.10.2 G (1)).2

3This exemption applies where this chapter requires a key features, simplified prospectus5 or other information to be provided in relation to a distance contract, if:

1. (1)

   the firm has no initial service agreement with the customer:

2. (2)

   the firm has performed an operation for the customer within the last year: and

3. (3)

   the contract is in relation to a successive operation or separate operation of the same nature (see COB 1.10.2 G (2)).

6This exemption applies where a private customer is automatically enrolled by his employer in a stakeholder pension scheme, a pension policy or a pension contract provided through the workplace. In that case, in good time before the private customer is bound by the contract or offer, he must be provided with the appropriate key features or other information.

2At each anniversary of the date on which a long-term care insurance contract which is based on single premium investment bonds was entered into, the insurer must:

1. (1)

   provide the private customer with a table based on the format of COB 6.5.24 containing at least the current fund value and projected future policy values (as in column "What you might get back");

2. (2)

   where it is the case, inform the private customer of the possibility that future policy values may be insufficient to fulfil the original purpose of the contract; and

3. (3)

   inform the private customer how to obtain advice on investments in respect of long-term care insurance contracts, and that it is in his best interest to do so.

4When a firm opens a Revenue allocated CTF, the firm must send the private customer on the first available opportunity after the account has been opened, whichever of the key features or other information is required in a durable medium.