COBS 9.6 Special rules for giving basic advice on a stakeholder product1

A firm is permitted to maintain more than one range of stakeholder products.1

A range of stakeholder products:1

1. (1)

   may include more than one deposit-based stakeholder product;1

2. (2)

   may include the stakeholder products of more than one stakeholder product provider;1

3. (3)

   must not include any more than one:1

   1. (a)

      CIS stakeholder product or linked life stakeholder product; or1

   2. (b)

      stakeholder CTF; or1

   3. (c)

      stakeholder pension scheme.1

When a firm provides basic advice it must:1

1. (1)

   explain why it chose the stakeholder products and stakeholder product providers that appear in the relevant range; and1

2. (2)

   give the client a list of the stakeholder products and stakeholder product providers that appear in that range;1

if the client asks it do so.1

When a firm first has contact with a retail client with a view to giving basic advice on a stakeholder product, it must give the retail client:1

1. (1)

   the basic advice initial disclosure information (COBS 9 Annex 1), in a durable medium, together with an explanation of that information, unless:1

   1. (a)

      it has already done so and the basic advice initial disclosure information is likely still to be accurate and appropriate; or1

   2. (b)

      the contact is not face to face and is using a means of communication which makes it not practicable to provide the basic advice initial disclosure information in a durable medium; and1

2. (2)

   an explanation of how the advice will be paid for and the fact that any commission will be disclosed.1

If a firm's first contact with a retail client is not face to face, it must:1

1. (1)

   inform the client at the outset:1

   1. (a)

      (if the communication is initiated by or on behalf of a firm), of the name of the firm and the commercial purpose of the communication;1

   2. (b)

      [deleted]3

      3
   3. (c)

      that the firm will provide the retail client with basic advice without carrying out a full assessment of the retail client's needs and circumstances; and1

   4. (d)

      that such information will be confirmed in writing; and1

2. (2)

   (if not provided at first contact) send the client the basic advice initial disclosure information (COBS 9 Annex 1) in a durable medium as soon as reasonably practicable following the conclusion of the first contact;13

3. (3)

   3(unless the relevant product is a deposit-based stakeholder product) if the contact is by spoken interaction, provide the client with the disclosure required by the rules on additional oral disclosure for firms providing restricted advice (COBS 6.2B.38R5).3

When a firm gives basic advice, it must do so using:1

1. (1)

   a single range of stakeholder products; and1

2. (2)

   a sales process that includes putting pre-scripted questions to the client.1

When a firm gives basic advice it must not:1

1. (1)

   describe or recommend a stakeholder product outside the firm's range; or1

2. (2)

   describe or recommend a smoothed linked long term stakeholder product; or1

3. (3)

   describe fund choice, or recommend a particular fund, if a stakeholder product offers a choice of funds; or1

4. (4)

   recommend the level of contributions required to be made to a stakeholder pension scheme to achieve a specific income in retirement; or1

5. (5)

   recommend or agree that a client makes a contribution to an ISA which exceeds the HM Revenue & Customs ISA limits.1

1. (1)

   If a firm starts the sales process for a stakeholder product that is not a deposit-based stakeholder product, it must not depart from that process unless it has advised the retail client that it will not provide basic advice on stakeholder products during the period of departure. A firm that does that must not provide basic advice during the departure period.1

2. (2)

   Before a firm returns to the sales process for stakeholder products, it must tell the retail client that that process is about to recommence.1

1A firm must only recommend a stakeholder product to a retail client if:

1. (1)

   it has taken reasonable steps to assess the client's answers to the scripted questions and any other facts, circumstances or information disclosed by the client during the sales process;

2. (2)

   (unless the relevant product is a deposit-based stakeholder product) having done so, it has reasonable grounds for believing that the stakeholder product is suitable for the client; and

3. (3)

   the firm reasonably believes that the client understands the firm's advice and the basis on which it was provided.

1If a firm giving basic advice recommends to a retail client to acquire a stakeholder product, it must ensure that, before the conclusion of the contract, its representative:

1. (1)

   (unless the relevant product is a deposit-based stakeholder product) explains to the client, if necessary in summary form, but always in a way that will allow the client to make an informed decision about the firm's recommendation:

   1. (a)

      the nature of the stakeholder product; and

   2. (b)

      the "aims", "commitment" and "risks" sections of the appropriate key features document;

2. (2)

   provides the client with a summary sheet, which is in a durable medium and sets out, for each product it recommends:

   1. (a)

      the specific amount the client wishes to pay into the product; and

   2. (b)

      the reasons for the recommendation, including the client's attitude to risk and any information provided by the client on which the recommendation is based; and

3. (3)

   informs the client that in determining any subsequent complaint, the Ombudsman may take into account the limited information on which the recommendation was based and the fact that it was not tailored to take account of those aspects of the client's financial needs and circumstances not covered by the firm's sales process.

1Notwithstanding COBS 9.6.14R (2) a firm may provide the summary sheet (COBS 9.6.14R (2)) as soon as reasonably practicable after the conclusion of the contract if the client asks it to do so, or the contract will be concluded using a means of distance communication that does not enable the provision of the summary sheet in a durable medium before the conclusion of the contract, but only if the firm:

1. (1)

   reads the summary sheet to the client before it concludes the contract; and

2. (2)

   sends the summary sheet to the client as soon as practicable after the conclusion of the contract.

1If a firm concludes a contract for a stakeholder product with or for a retail client it must provide a copy of the completed questions and answers to the client in a durable medium as soon as reasonably practicable afterwards.

1. (1)

   [deleted]3

   3
2. (2)

   When a firm provides basic advice on a stakeholder product, it3 may use the facilities and stationery it uses for other business in respect of which it does hold itself out as acting or advising independently.

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1A firm must ensure that none of its representatives:

1. (1)

   is likely to be influenced by the structure of his or her remuneration to give unsuitable basic advice on stakeholder products to a retail client; or

2. (2)

   refers a retail client to another firm in circumstances which would amount to the provision of any fee, commission or non-monetary benefit.

1. (1)

   6A firm providing basic advice on a stakeholder product that is a life policy must, in addition to providing the statement of demands and needs required under COBS 7.3.1R, provide the client with a personalised explanation of why a particular life policy would best meet the client’s demands and needs.

2. (2)

   The details must be modulated according to the complexity of the life policy proposed and the type of client.

3. (3)

   The information in (1) must be provided in accordance with COBS 7.4.

[Note: third paragraph of article 20(1) and 20(2) of the IDD]

1A firm must record that it has chosen to give basic advice to a retail client and make a record of the range used and the summary sheet (COBS 9.6.14R (2)) prepared for each retail client. That record must be retained for at least five years from the date of the relevant basic advice.

1. (1)

   1A firm must make an up-to-date record of:

   1. (a)

      its scope of basic advice, and the scope of basic advice used by its appointed representatives (if any); and

   2. (b)

      its range (or ranges) of stakeholder products, and the range (or ranges) used by its appointed representatives (if any).

2. (2)

   Those records must be retained for five years from the date on which they are replaced by a more up-to-date record.