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  3. Point in time
    2009-02-10

MCOB 4.3 Scope of service provided

Providing services within and beyond scope

MCOB 4.3.1R
  1. (1)

    Subject to (2), a firm must take reasonable steps to ensure that the scope of the service given to a customer, and the home finance transactions1 offered, is based on a selection from one of the following:

    1
    1. (a)

      the whole market; or

    2. (b)

      a limited number of home finance providers1; or

      1
    3. (c)

      a single home finance provider1.

      1
  2. (2)

    A firm may change the scope of the service it gives to a particular customer by widening the scope, for example, from that in (1)(c) to that in (b) or (a) but it must take reasonable steps to ensure that before doing so:

    1. (a)

      the customer is made aware of the proposed change by a communication in a durable medium; and

    2. (b)

      the customer's attention is drawn to any change in the fees that the customer must pay to the firm for the firm's services.

MCOB 4.3.2R

A firm must take reasonable steps to ensure that the extent of the scope of the service which it holds itself out as offering to a customer reflects the extent of that scope in practice.

MCOB 4.3.3G

SYSC 3.2.6 R and SYSC 6.1.1 R 2(Compliance) requires a firm (including a common platform firm) 2to 'establish , implement2 and maintain effective systems and controls for compliance with applicable requirements and standards under the regulatory system'. In meeting this requirement in relation to MCOB 4.3.2 R, a firm which states that it provides a service based on a limited number of mortgage lenders (see MCOB 4.3.1 R (1)(b)) should have adequate systems and controls in place to monitor whether business is actually placed with those mortgage lenders.

2

Whole of market

MCOB 4.3.4R
  1. (1)

    A firm which holds itself out as giving information or advice to customers on regulated mortgage contracts from the whole market must not give any such information or advice unless:

    1. (a)

      it has considered a sufficiently large number of regulated mortgage contracts which are generally available from the market; and

    2. (b)

      the consideration in (a) is based on criteria which reflect adequate knowledge of the regulated mortgage contracts generally available from the market as a whole.

  2. (2)

    A firm in (1) must satisfy the obligation in MCOB 4.7.2 R by taking reasonable steps to ensure that a personal recommendation given to a customer is:

    1. (a)

      in accordance with the consideration in (1); and

    2. (b)

      the regulated mortgage contract which on the basis of that consideration is the most suitable to meet the customer's needs.

MCOB 4.3.4AR

1In applying this chapter, there is:

  1. (1)

    one market for regulated mortgage contracts that are not lifetime mortgages; and

  2. (2)

    another market for home purchase plans.

MCOB 4.3.5G

If a firm holds itself out as giving information or advice to customers on regulated mortgage contracts generally available from the whole market, the firm may choose to offer its customers only a selection of those regulated mortgage contracts. The firm's selection of regulated mortgage contracts for this purpose will need to be sufficiently large to enable the firm to satisfy the suitability requirement in MCOB 4.3.4 R (Whole of market).

MCOB 4.3.6G
  1. (1)

    When offering only a selection of regulated mortgage contracts as described in MCOB 4.3.5 G, a firm should ensure that its analysis of the market and of the available regulated mortgage contracts is kept adequately up to date. For example, a firm would need to update its selection of regulated mortgage contracts if it became aware that a regulated mortgage contract had become generally available offering an improved product feature, or a better interest rate, when compared with the regulated mortgage contracts currently in the firm's selection.

  2. (2)

    One way in which a firm may wish to satisfy MCOB 4.3.4 R is by using a panel of mortgage lenders, which includes representative firms from the whole market. However, if a firm wishes to offer a whole of market service through the use of a panel, it must still assess the individual regulated mortgage contracts that are being offered by mortgage lenders in making its selection.

Independence

MCOB 4.3.7R
  1. (1)

    When providing information or giving advice to a customer on home finance transactions1, a firm must not hold itself out as acting independently unless it intends to:

    1
    1. (a)

      provide that service wholly or predominantly based on the whole market in the relevant type of home finance transaction1; and

    2. (b)

      enable the customer to pay a fee for the provision of that service.

  2. (2)

    A firm which in accordance with (1) holds itself out as independent must ensure that the information or advice subsequently given to the customer concerned is information or advice on home finance transactions1 from the whole market in the relevant type of home finance transaction1.

    1
MCOB 4.3.8G
  1. (1)

    MCOB 4.3.7 R stipulates what a firm must do if it is to hold itself out to any particular customer as acting independently. A firm which wishes to hold itself out generally as acting independently should ensure that doing so (for example through a trading name or advertising) is consistent with the kind of service which customers receive in relation to the relevant home finance transactions1.

    1
  2. (2)

    A firm that sells both investments and home finance products1 can offer from the whole market (or the whole market for a type of home finance transaction)1 and therefore be 'independent' for one but offer only a limited range for the other. If this is the case, the firm should explain the different nature of the services in a way that meets the requirement for clear, fair and not misleading communications in MCOB 2.2.6 (Clear, fair and not misleading communications).

    1
MCOB 4.3.9G

MCOB 4.3.7 R (1)(b) means that a firm wishing to hold itself out as independent will need to give a customer a purely fee-based option for paying its fees. However, the firm may in addition provide the customer with other payment options, such as a combination of fees and commission.

Appointed representatives

MCOB 4.3.10R

A firm may restrict the home finance transactions1it authorises a particular appointed representative to sell. If it does so, the appointed representative must reflect this restricted scope in any initial disclosure document or combined initial disclosure document1 provided to the customer.

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