1In this chapter:
'retail client' includes the trustee or operator of a stakeholder pension scheme or personal pension scheme and the trustee of a money-purchase occupational pension scheme; and
‘sell’ includes ‘sell, personally recommend or arrange the sale of’ in relation to a designated investment and equivalent activities in relation to a cash-deposit ISA and cash-deposit CTF.
a packaged product to a retail client, must provide a key features document and a key features illustration2 to that client (unless the packaged product is a unit in a UCITS scheme,7simplified prospectus scheme or an EEA UCITS scheme which is a recognised scheme);7
7a life policy to a client, must provide the Solvency II Directive information13 to that client;
1313the variation of a life policy or personal pension scheme to a retail client, must provide that client with sufficient information about the variation for the client to be able to understand the consequences of the variation;
11[deleted]10
410the variation of a personal pension scheme to a retail client, which involves an election by the client to make income withdrawals or a purchase of a short-term annuity, must provide that client with such information as is necessary for the client to understand the consequences of the variation, including where relevant, the information required by COBS 13 Annex 2.2.9 R (Additional requirements: drawdown pensions);65
6a cash-deposit ISA or cash-deposit CTF to a retail client, must provide a key features document to that client;
a unit in a simplified prospectus scheme to a client, must offer the scheme's current simplified prospectus to that client. In addition, if the client is a retail client present in the EEA, the firm must provide the simplified prospectus to the client together with:
enough information for the client to be able to make an informed decision about whether to hold the units in a wrapper (if the units will, or may, be held in that way); and
information about the three types of CTF that are generally available (stakeholder CTFs, cash-deposit CTFs and2security-based CTFs2), and the type of CTF the firm is offering (if the units will, or may, be held in a CTF);
[deleted]7
7a unit in a UCITS scheme, or in an EEA UCITS scheme which is a recognised scheme, to a client, must:7
provide a copy of the scheme'skey investor information document or, as the case may be, EEA key investor information document to that client; and7
where the client is a retail client, provide separately (unless already provided) the information required by COBS 13.3.1R (2) (General requirements) and, if that client is present in the EEA, the information required by (5)(a) and (b);7
where the operator of a non-UCITS retail scheme has a dispensation from the FCA in the form of a general waiver by consent under which it may market units of the scheme on the basis of a key investor information document (as modified by the general waiver direction, a "NURS KII document"), rather than on the basis of a key features document or simplified prospectus, a firm that sells units in the scheme must comply with its obligations under this rule by:7
providing the retail client with the relevant NURS KII document; and7
offering any client that is not a retail client the relevant NURS KII document;7
on condition that it complies with each of the other rules in this section in relation to the provision of the document, as if references in those rules to a “key features document” or “simplified prospectus” were a reference to the “NURS KII document”.
[Note: in respect of (2) article 185(1) of the Solvency II Directive13]
13to an authorised fund manager of a UCITS scheme that is either an authorised unit trust, authorised contractual scheme12 or an ICVC, and an ICVC that is a UCITS scheme.
An authorised fund manager and an ICVC in (1) that sells units in a UCITS scheme directly, or through another natural or legal person who acts on its behalf and under its full and unconditional responsibility, must ensure that investors are provided with the key investor information document for the scheme.
An authorised fund manager and an ICVC in (1) that does not sell units in a UCITS scheme directly, or through another natural or legal person who acts on its behalf and under its full and unconditional responsibility, must ensure that the key investor information document for the scheme is provided on request to product manufacturers and intermediaries selling, or advising investors on, potential investments in those UCITS schemes or in products offering exposure to them.
The key investor information document must be provided to investors free of charge.
An authorised fund manager and an ICVC in (1) may, instead of providing the key investor information document to investors in paper copy in accordance with (2), provide it in a durable medium other than paper or by means of a website that meets the website conditions, in which case the authorised fund manager and ICVC must:
deliver a paper copy of the key investor information document to the investor on request and free of charge; and
make available an up-to-date version of the key investor information document to investors on the website of the ICVC or authorised fund manager.
[Note: articles 80 and 81 of the UCITS Directive]
9When the rules in this chapter require the offer or provision of a key features illustration, a firm may provide a generic key features illustration if that generic key features illustration has been prepared in accordance with COBS 13.4.2 R.
9A firm that arranges to start the facilitation of, or an increase in, an adviser charge or consultancy charge from an in-force packaged product, must provide to the retail client sufficient information for the retail client to be able to understand the likely effect of that facilitation.
The documents or information required to be provided or offered by COBS 14.2.1 R and COBS 14.2.1C R9 must be in a durable medium or made available on a website (where that does not constitute a durable medium) that meets the website conditions.
9A firm that personally recommends that a retail client holds a particular asset in a SIPP must provide that client with sufficient information for the client to be able to make an informed decision about whether to buy or invest.
This rule does not apply if the asset is described in COBS 14.2.1 R.
A firm is not required to provide:
a document, if the firm produces the product and the rules in this section require another firm to provide the document;
a key features document or key features illustration2, if another person is required to provide the distance marketing information by the rules of another EEA State;
the Solvency II Directive information,13 if another person is required to provide that information by the rules of another EEA State;
13a simplified prospectus if:
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7the client is buying or investing in response to a direct offer financial promotion without receiving a personal recommendation to buy or invest; and
the firm offers an up-to-date copy of the simplified prospectus to the client and provides materially the same information to the client in some other way.
[Note: in respect of (3), article 185(8) of the Solvency II Directive13]
132A firm is not required to provide a key features illustration for a product if the information that would have been included in that illustration is included in the key features document provided to the client. 2
A firm is not required to provide a key features document or a key features illustration2for:
a key features scheme if it provides a simplified prospectus instead;
a life policy if:
13the firm is operating from an establishment in another EEA State and the sale is by distance contract; or
the client is habitually resident outside the United Kingdom and the sale is not by distance contract.
[Note: in respect of (2), articles 4(1) and 16 of the Distance Marketing Directive and article 185 of the Solvency II Directive13]
13A firm is not required to provide a key features document or a key features illustration2, if:
the client is buying or investing in response to a direct offer financial promotion without receiving a personal recommendation to buy or invest; and
the firm provides materially the same information in some other way.
A firm is not required to provide a , a key features illustration2 or a simplified prospectus for a key features scheme or simplified prospectus scheme if:
the client is habitually resident outside the EEA and not present in the EEA when the relevant application is signed; or
the purchase is by a discretionary investment manager on behalf of a retail client; or
the sale is arranged or personally recommended by an investment manager and the client has agreed that a key features document or simplified prospectus is not required; or
a retail client is purchasing a holding in a scheme in which the client already has a holding, or the client is switching from one class of shares or units to another in the same scheme, and the relevant document has already been provided to that client.
7For the purposes of the provision rules in relation to a key investor information document, a firm:
may satisfy the requirement to provide the document to the investor by providing it to a person who has written authority to make investment decisions on that investor’s behalf; and
is not required to consider as a new transaction:
a subscription to units in a UCITS scheme or an EEA UCITS scheme in which the client already holds units; or
a series of connected transactions undertaken as the consequence of a single investment decision; or
a decision by the client to switch from one class of units to another in the same scheme;
if an up-to-date version of the key investor information document for the scheme or the relevant class of units has already been provided to that client.
[Note: article 80 of the UCITS Directive]
Although a firm is not always required to provide a simplified prospectus to a client (COBS 14.2.9 R), the obligation to offer the prospectus to the client (COBS 14.2.1R (5)) remains.7
The FCA would regard a decision to subscribe to a regular monthly savings plan as a single investment decision for the purpose of COBS 14.2.9AR (2)(a). However, a subsequent decision by the client to increase the amount of the regular contributions to be invested in units of a particular scheme or to direct the contributions to a different scheme, would in each case constitute a new transaction.7
A firm may provide a single document, which describes more than one key features scheme or7simplified prospectus scheme, or any combination of those schemes, if:
7 7the schemes are offered through a platform service;8
8the document clearly describes the difference between the relevant schemes; and
(in the case of a simplified prospectus scheme) the firm also offers a copy7 of the relevant prospectus7 to the client.
7In the case of a distance contract comprising an initial service agreement, followed by successive operations or a series of separate operations of the same nature performed over time, the rules in this section only apply to the initial agreement.
If there is no initial service agreement but the successive operations or separate operations of the same nature performed over time are performed between the same contractual parties, the rules in this section only apply:
When the rules in this section require a firm to:
offer a simplified prospectus to a client, that prospectus must be offered free of charge before the conclusion of the contract; or
7provide a key features document, a simplified prospectus, or any other document or information to a client, the document or information must be provided free of charge and in good time before the firm carries on the relevant business; or7
7provide a key investor information document or EEA key investor information document to a client, it must be provided in good time before the client's proposed subscription for units in the scheme.7
A key features document for an HMRC allocated CTF must be provided as soon as reasonably possible after the CTF has been opened.
A firm may provide a document, or the information required to be provided by the rules in this section, in a durable medium immediately after the conclusion of a distance contract, if the contract has been concluded at a client's request using a means of distance communication that does not enable the document or information to be provided in that form in good time before the client is bound by the contract.7
The exception in (1) does not apply in relation to the provision of an EEA key investor information document or a key investor information document required to be provided under COBS 14.2.1 R and COBS 14.2.1A R.7
Where the rules in this section require a document or information to be provided, in the case of a voice telephony communication, a firm must:7
7if the client gives explicit consent to receiving only limited information, provide the abbreviated distance marketing disclosure information () orally to the client;7
if the client does not give explicit consent to only receiving limited information, and the parties wish to proceed by voice telephony communication, provide the distance marketing information () orally to the client;7
in the case of (a) or (b), send the documents or information to the client in a durable medium immediately after the contract is concluded.7
The exception in (1) does not apply in relation to the provision of an EEA key investor information document or a key investor information document required to be provided under COBS 14.2.1 R and COBS 14.2.1A R.7
7This section applies to a firm in relation to:
the following regulated activities when carried on for a retail client:
making a personal recommendation about a designated investment6;5 or
managing investments that are designated investments (other than a P2P agreement);5 or
arranging (bringing about) or executing a deal in a warrant, non-readily realisable security4 or derivative; or
engaging in stock lending activity; or4
4operating an electronic system in relation to lending, but only in relation to facilitating a person becoming a lender under a P2P agreement.4
A firm must provide a client with a general description of the nature and risks of designated investments, taking into account, in particular, the client's categorisation as a retail client or a professional client. That description must:
explain the nature of the specific type of designated investment concerned, as well as the risks particular to that specific type of designated investment, in sufficient detail to enable the client to take investment decisions on an informed basis; and
include, where relevant to the specific type of designated investment concerned and the status and level of knowledge of the client, the following elements:
the risks associated with that type of designated investment including an explanation of leverage and its effects and the risk of losing the entire investment;
the volatility of the price of designated investments and any limitations on the available market for such investments;
the fact that an investor might assume, as a result of transactions in such designated investments, financial commitments and other additional obligations, including contingent liabilities, additional to the cost of acquiring the designated investments; and
any margin requirements or similar obligations, applicable to designated investments of that type.
[Note: article 31(1) and (2) of the MiFID implementing Directive]
If a firm provides a retail client with information about a designated investment that is the subject of a current offer to the public and a prospectus has been published in connection with that offer in accordance with the Prospectus Directive, that firm must inform the retail client where that prospectus is made available to the public.
[Note: article 31(3) of the MiFID implementing Directive]
Where the risks associated with a designated investment composed of two or more different designated investments or services are likely to be greater than the risks associated with any of the components, a firm must provide an adequate description of the components of that designated investment and the way in which its interaction increases the risks.
[Note: article 31(4) of the MiFID implementing Directive]
In the case of a designated investment that incorporates a guarantee by a third party, the information about the guarantee must include sufficient detail about the guarantor and the guarantee to enable the retail client to make a fair assessment of the guarantee.
[Note: article 31(5) of the MiFID implementing Directive]
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A firm need not treat each of several transactions in respect of the same type of financial instrument as a new or different service and so does not need to comply with the provision rules (COBS 14.3.2 R to COBS 14.3.5 R) in relation to each transaction.
But a firm should ensure that the client has received all relevant information in relation to a transaction, such as details of product charges that differ from those already disclosed.
[Note: in respect of (1), recital 50 to to the MiFID implementing Directive]
Providing a key features document, key investor information document, EEA key investor information document3 or simplified prospectus may satisfy the requirements of the rules in this section.
4Examples of information a firm should provide to explain the specific nature and risks of a P2P agreement include:
expected and actual default rates in line with the requirements in COBS 4.6 on past and future performance;
a summary of the assumptions used in determining expected future default rates;
a description of how loan risk is assessed, including a description of the criteria that must be met by the borrower before the operator of the electronic system in relation to lending6 considers the borrower eligible for a P2P agreement;
where lenders have the choice to invest in specific P2P agreements, details of the creditworthiness assessment of the borrower carried out;
whether the P2P agreement benefits from any security and if so, what;
a fair description of the likely actual return, taking into account fees, default rates and taxation;
an explanation of how any tax liability for lenders arising from investment in P2P agreements would be calculated;
an explanation of the operator of the electronic system in relation to lending's6 procedure for dealing with a loan in late payment or default;
the procedure for a lender to access their money before the term of the P2P agreement has expired; and6
an explanation of what would happen if the operator of the electronic system in relation to lending6 fails, including confirmation that there is no recourse to the Financial Services Compensation Scheme.
6The guidance in COBS 14.3.7AG is relevant both to firms which are operators of electronic systems in relation to lending and firmsadvising on P2P agreements.
6 Firms providing information to clients, and communicating information, about an innovative finance ISA should also have regard to the guidance in COBS 4.5.9G.
The documents and information provided in accordance with the rules in this section must be in a durable medium or available on a website (where that does not constitute a durable medium) that meets2 the website conditions.
[Note: article 29(4) of the MiFID implementing Directive]
The information to be provided in accordance with the rules in this section must be provided in good time before a firm carries on designated investment business or ancillary services with or for a retail client.
A firm may provide that information immediately after it begins to carry on that business if:
the firm was unable to comply with (1) because, at the request of the client, the agreement was concluded using a means of distance communication which prevented the firm from complying with that rule; and
in any case where the rule on voice telephony communications (COBS 5.1.12 R) does not otherwise apply, the firm complies with that rule as if the client was a consumer.
[Note: article 29(2) and (5) of the MiFID implementing Directive]
A firm must notify a client in good time about any material change to the information provided under the rules in this section which is relevant to a service that the firm is providing to that client. That notification must be given in a durable medium if the information to which it relates is given in a durable medium.
[Note: article 29(6) of the MiFID implementing Directive]
If a firm provides a client with a key investor information document or EEA key investor information document3 that meets the requirements of articles 78 and 793 of the UCITS Directive (see COLL 4.7 (Key investor information and marketing communications)) and the KII Regulation,3 it will have provided appropriate information for the purpose of the requirement to disclose information on:
3 3designated investments and investment strategies (COBS 2.2.1R (1)(b)); and
costs and associated charges (COBS 2.2.1R (1)(d) and COBS 6.1.9 R1;
in relation to the costs and associated charges in respect of the UCITS scheme itself, including the exit and entry commissions.
[Note: article 34 of the MiFID implementing Directive]
A key investor information document and EEA key investor information document provide3 sufficient information in relation to the costs and associated charges in respect of the UCITS3 itself. However, a firm distributing units3 in a UCITS3 should also inform a client about all of the other costs and associated charges related to the provision of its services in relation to units in the UCITS.3
3 3 3 3 3[Note: recital 55 to the MiFID implementing Directive]
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If an intermediate Unitholder receives a reasonable request from an authorised fund manager for information relating to the beneficial owners of the units of a scheme that it operates which the authorised fund manager reasonably needs for the purposes of liquidity management, the intermediate Unitholder must provide that information to the authorised fund manager as soon as is reasonably practicable.
Examples of information which may be reasonably requested by an authorised fund manager include:
a breakdown of the total number of units held by the intermediate Unitholder in each scheme to indicate the number of units attributable to individual beneficial owners; and
information about the types of distribution channel which have been used to sell the units to the relevant beneficial owners.
In determining whether a request from an authorised fund manager is reasonable, an intermediate Unitholder may take into account the frequency with which such requests have been received from that authorised fund manager.
