COBS 6.1B 4Retail investment product provider, operator of an electronic system in relation to lending, and platform service provider requirements relating to adviser charging and remuneration11

1. (1)

   1This section applies to:24

   1. (a)

      a firm which is a retail investment product provider; 11

      4
   2. (b)

      in relation to COBS 6.1B.9 R, COBS 6.1B.10 G and COBS 6.1B.11 G, a platform service provider; 11and

      4
   3. (c)

      11a firm which is an operator of an electronic system in relation to lending;

   in circumstances where a retail client receives a personal recommendation in relation to a retail investment product or P2P agreement11 and also where a retail investment product transaction is executed by a platform service provider and no personal recommendation has been made.104

2. (2)

   This section does not apply to a retail investment product provider in circumstances where a firm gives advice or provides services to an employer in connection with a group personal pension scheme or group stakeholder pension scheme.2

This section does not apply to a firm when a retail client receives basic advice in accordance with the basic advice rules.

3This section does not apply to a firm in circumstances where a retail client receives a personal recommendation in relation to one of7 the firm's Holloway sickness policies,7 provided that the Holloway policy special application conditions are met.

This section does not apply if the retail client is outside the United Kingdom.

1. (1)

   12Except as specified in COBS 6.1B.5AR, a firm must not offer or pay (and must ensure that none of its associates offers or pays) any commissions, remuneration or benefit of any kind to another firm, or to any other third party for the benefit of that firm, in connection with that firm’s business of advising13 (or any related services), except those that facilitate the payment of adviser charges from a retail client’s investments in accordance with this section.

2. (2)

   Paragraph (1) does not apply to minor non-monetary benefits which meet the requirements of:

   1. (a)

      COBS 2.3A.19R, in connection with the provision of investment services; or

   2. (b)

      COBS 6.1A.5AR(2), in connection with other business.

5A firm and its associates may:

1. (1)

   offer and pay a commission, remuneration or benefit of any kind in the circumstances set out in COBS 6.1B.5 R if:

   1. (a)

      the personal recommendation was made on or before 30 December 2012;

   2. (b)

      the offer and payment was permitted by the rules in force on 30 December 2012;

   3. (c)

      the contract under which the right to receive the commission, remuneration or benefit of any kind was entered into on or before 30 December 2012;

   4. (d)

      the terms of that contract as at 30 December 2012 included the right to receive the commission, remuneration or benefit of any kind; and

   5. (e)

      the retail client enters into the transaction in respect of which the personal recommendation was given within a reasonable time of the personal recommendation being given; and

2. (2)

   enter into an arrangement under which the right to receive the commission, remuneration or benefit of any kind in (1) is transferred to another firm or its associate.

A firm must:

1. (1)

   take reasonable steps to ensure that its retail investment product charges or its charges as an operator of an electronic system in relation to lending 11are not structured so that they could mislead or conceal from a retail client the distinction between those charges and any adviser charges payable in respect of its retail investment products or investments in P2P agreements made through the system of which it is the operator of an electronic system in relation to lending; 11

   9
2. (2)

   not include in any marketing materials in respect of its retail investment products, the service it offers as an operator of an electronic system in relation to lending11 or facilities for collecting adviser charges any statements about the appropriateness of levels of adviser charges that a firm could charge in making personal recommendations or providing related services in relation to its retail investment products or investments through the system in relation to which it is the operator of an electronic system in relation to lending11 ; and9

   9
3. (3)

   9not defer, discount or rebate retail investment product charges or its charges as an operator of an electronic system in relation to lending 11in a way that offsets or may appear to offset any adviser charges or platform charges that are payable, including by maintaining retail investment product charges or its charges as an operator of an electronic system in relation to lending 11at a level such that a cash rebate, other than a cash rebate permitted by COBS 6.1B.7A R or10 COBS 6.1E.10R (2), is payable to the retail client.

10A retail investment product provider may maintain retail investment product charges at a level such that a cash rebate is payable to the retail client if:

1. (1)

   the retail investment product transaction was agreed on or before 5 April 2014 and executed within a reasonable time of that agreement; and

2. (2)

   the retail client's right to receive the cash rebate arose on or before 5 April 2014; and

3. (3)

   on or after 6 April 2014 no change is made to that product, or, where there is such a change on or after 6 April 2014, only in relation to the unchanged part of that product.

COBS 6.1B.7 R does not prevent a firm from offering a promotional discount to a retail client in the form of extra units or additional investment, but a9 firm that offers to facilitate, directly or through a third party, the payment of adviser charges, including6 by means of a platform service must:4

1. (1)

   obtain and validate instructions from a retail client in relation to an adviser charge;

2. (2)

   offer sufficient flexibility in terms of the adviser charges it facilitates; and

3. (3)

   not pay out or advance adviser charges to the firm to which the adviser charge is owed over a materially different time period, or on a materially different basis to that in which it recovers the adviser charge from the retail client (including paying any adviser charges to the firm that it cannot recover from the retail client).