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PROD 1.1 Application and purpose

Purpose

PROD 1.1.1 G

1The purpose of PROD is to improve firms’ product oversight and governance processes and to set out the FCA’s statement of policy on making temporary product intervention rules.

PROD 1.1.2 G

Product oversight and governance refers to the systems and controls firms have in place to design, approve, market and manage products throughout the products’ lifecycle to ensure they meet legal and regulatory requirements.

PROD 1.1.3 G

Good product governance should result in products that:

  1. (1)

    meet the needs of one or more identifiable target markets;

  2. (2)

    are sold to clients in the target markets by appropriate distribution channels; and

  3. (3)

    deliver appropriate client outcomes.

PROD 1.1.4 G

2Unless the contrary intention appears, a reference to Gibraltar-based firm in PROD has the same meaning as in the Gibraltar Order.

PROD 1.3 Application of PROD 3

General: Who? What?

PROD 1.3.1 R

1 PROD 3 applies to

  1. (1)

    a MiFID investment firm;

  2. (2)

    a CRD credit institution;

  3. (3)

    a MiFID optional exemption firm; and

  4. (4)

    branches of third country investment firms;

  5. with respect to:

  6. (5)

    manufacturing financial instruments and structured deposits; and

  7. (6)

    distributing financial instruments, structured deposits and investment services.

[Note: articles 1(3), 1(4), 16(3), 24(2) and 41(2) of MiFID]

PROD 1.3.-1A R

5A TP firm and a Gibraltar-based firm must also comply with the provisions in PROD 1.3 and PROD 3 in relation to a pathway investment, with respect to activities carried on from an establishment maintained by it, or its appointed representative, in the United Kingdom.

Other firms manufacturing or distributing financial instruments or structured deposits

PROD 1.3.2 R

Other firms which manufacture or distribute financial instruments or structured deposits should take account of PROD 3 as if it were guidance on the Principles and other relevant rules and as if “should” appeared in PROD 3 rules instead of “must”.

Eligible counterparty business

PROD 1.3.3 R

PROD 3.3.1R does not apply to eligible counterparty business.

[Note: article 30(1) of MiFID]

Where?

PROD 1.3.4 R

PROD 3 applies to a firm with respect to activities carried on from an establishment maintained by it, or its appointed representative, in the United Kingdom.

PROD 1.3.5 R
  1. (1)

    PROD 3 also applies to a firm with respect to activities from an establishment overseas with a client in the United Kingdom.

  2. (2)

    But PROD 3 does not apply to those activities if the office from which the activity is carried on were a separate person and the activity:

    1. (a)

      would fall within the overseas persons exclusions in article 72 of the Regulated Activities Order; or

    2. (b)

      would not be regarded as being carried on in the United Kingdom.

PROD 1.3.6 R

[deleted]2

PROD 1.3.7 G

[deleted]2

PROD 1.3.8 G

[deleted]2

PROD 1.3.9 G

[deleted]2

PROD 1.3.10 G

[deleted]2

MiFID

PROD 1.3.11 G

PERG 13 contains general guidance on the persons and businesses to which the UK provisions which implemented MiFID apply2.

PROD 1.3.12 G

[deleted]2

PROD 1.3.13 G

[deleted]2

PROD 1.3.14 G

[deleted]2

Interaction of PROD 3 and the RPPD Guide

PROD 1.3.15 G

A firm to which PROD 3 applies need not apply the guidance in RPPD for matters covered by PROD if the firm has complied with PROD 3.

Manufacturing pathway investments

PROD 1.3.16 G

3 4A firm that is within the scope of PROD 3 (Product governance: MiFID) when it manufactures pathway investments other than in connection with its operating of a retail client’s personal pension scheme or stakeholder pension scheme, is also subject to PROD 6 (Product governance: additional provisions for pathway investments) as guidance with respect to that manufacturing activity (see PROD 1.6.1R(3)).

PROD 1.4 Application of PROD 4

PROD 1.4.1 R

1 PROD 4 applies to:

  1. (1)

    an insurance intermediary; and

  2. (2)

    an insurer,

with respect to:

  1. (3)

    manufacturing insurance products; and

  2. (4)

    distributing insurance products.

[Note: articles 1(2) and 25 of the IDD]

PROD 1.4.-1A R

6A TP firm and a Gibraltar-based firm must also comply with the provisions in:

  1. (1)

    PROD 1.4 and PROD 4.5 (Additional expectations for manufacturers and distributors in relation to value measures data).

  2. (2)

    7PROD 1.4 and PROD 4 in relation to a pathway investment.

PROD 1.4.1A R

5 PROD 4.5 (Additional expectations for manufacturers and distributors in relation to value measures data) applies regardless of when the product was first manufactured.

PROD 1.4.2 G

1In PROD an insurance product may be read as being a reference to the product for distribution to customers generally and is not intended to refer to each individual contract of insurance being sold or underwritten (unless the context indicates otherwise).

PROD 1.4.3 R

1 PROD 4 does not apply in relation to the manufacturing or distributing of:

  1. (1)

    a contract of large risks, or

  2. (2)

    a reinsurance contract.

[Note: article 25(4) of the IDD]

Manufacturing and distributing pathway investments

PROD 1.4.3A G

3 4A firm that is within the scope of PROD 4 (Product governance: IDD) when manufactures pathway investments other than in connection with its operating of a retail client’s personal pension scheme or stakeholder pension scheme, is also subject to PROD 6 (Product governance: additional provisions for pathway investments) as guidance with respect to that manufacturing activity (see PROD 1.6.1R(2)).

PROD 1.4.3B R

3 4Where a firm:

  1. (1)

    manufactures or distributes pathway investments in connection with its operating of a retail client’s personal pension scheme or stakeholder pension scheme; and

  2. (2)

    is not otherwise within the scope of the rules or onshored regulations7 in PROD in relation to that manufacturing or distribution activity, then PROD 4, PROD 1.4.4UK and PROD 1.4.10G, apply7 with respect to that manufacturing or distribution activity.

PROD 1.4.3C G

3 4The effect of PROD 1.4.3BR is to apply PROD 4 to any firm, such as a SIPP operator, which:

  1. (1)

    manufactures or distributes pathway investments in connection with its operating of a retail client’s personal pension scheme or stakeholder pension scheme; and

  2. (2)

    before the entry into force of PROD 1.4.3BR, was not subject to the rules or onshored regulations in PROD.

When an intermediary may be considered to be manufacturing

PROD 1.4.4 UK

2For the purposes of [PROD 4.2.1R, PROD 4.2.2R, PROD 4.2.29R, PROD 4.2.34R, PROD 4.3.1R and PROD 4.3.2R], insurance intermediaries shall be considered manufacturers where an overall analysis of their activity shows that they have a decision-making role in designing and developing an insurance product for the market.

3(2) A decision-making role shall be assumed, in particular, where insurance intermediaries autonomously determine the essential features and main elements of an insurance product, including its coverage, price, costs, risk, target market and compensation and guarantee rights, which are not substantially modified by the insurance undertaking providing coverage for the insurance product.

3(3) Personalisation of and adaptation of existing insurance products in the context of insurance distribution activities for individual customers, as well as the design of tailor-made contracts at the request of a single customer, shall not be considered manufacturing.

[Note: article 3 of the IDD POG Regulation]

PROD 1.4.5 G

1The effect of PROD 1.4.4UK2 and PROD 1.4.6R is that an insurance intermediary needs to consider if it is manufacturing an insurance product and, if so, should comply with PROD 4.2 (Manufacture of insurance products).

Effect of provisions marked “UK” for certain manufacturers and distributors of insurance products7

PROD 1.4.6 R
  1. (1)

    1Subject to (2) and PROD 1.4.3R, provisions in this section and in PROD 4 marked “UK”2 apply to firms manufacturing or distributing insurance products, but to whom the IDD POG Regulation does not apply, as if they were rules.

  2. (2)

    For the purposes of (1), a word or phrase used in the IDD POG Regulation and referred to in column (A) has the meaning indicated in Column (B) of the table below:

    (a)

    (b)

    2

    2

    “Article 8(2)”

    PROD 4.2.30UK2

    2

    “customer” and “potential customer”

    customer

    2

    “insurance-based investment products”

    insurance-based investment products

    “insurance distribution activities” and “distribution activities”

    insurance distribution activities

    “insurance distributor”

    distributor

    “insurance intermediary”

    insurance intermediary

    “insurance undertaking”

    insurer

    “manufacturer” and “manufacturers within the meaning of Article 2 of this Delegated Regulation”

    manufacturer

    “manufacturing”

    manufacturing

    “shall”

    must

  3. (3)

    In this sourcebook, where a reproduced provision of an article of the IDD POG Regulation refers to another part of the IDD POG Regulation, that other provision must also be read with reference to the table in (2).

Effect and interpretation of PROD 1.4 and PROD 4 for certain manufacturers and distributors of pathway investments

PROD 1.4.6A R

3 4A firm to which PROD 1.4.3BR applies must

  1. (1)

    comply with provisions marked "UK"7 in PROD 1.4 and PROD 4 as if they were rules; and

  2. (2)

    read terms or phrases found in PROD 1.4 or PROD 4 as follows:

    1. (a)

      terms referred to in column (1) of the table below have the meaning indicated in the same row of column (2) of the table;

    2. (b)

      terms relating to insurance or insurance products have the meaning of the corresponding term relevant in the context of pathway investments; and

    3. (c)

      terms or phrases which are only relevant to firms manufacturing or distributing insurance products may be disregarded.

This table belongs to PROD 1.4.6AR(2)(a).

(1)

(2)

7 7
7 7

7“ICOBS 2.5-1R and COBS 2.1.1R”

7 COBS 2.1.1R

“ICOBS”

relevant conduct of business obligations

"PROD 4.2 requirements of the IDD POG Regulation)”7

PROD 4.2

7

“insurance-based investment products”

pathway investment

“insurance distributor”

distributor

“insurance distribution activities”

distribution activities

“insurance intermediary and an insurance undertaking”

firms

“insurance product”

pathway investment

“‘manufacturer’ and ‘manufacturers’ within the meaning of Article 2 of this Delegated Regulation”

manufacturer

“manufacturing”

manufacturing

“premiums”

costs and charges

“shall”

must

Where?

PROD 1.4.7 R

1 PROD 4 applies to a firm with respect to activities carried on from an establishment maintained by it, or its appointed representative, in the United Kingdom.

[Note: article 7(2) of the IDD]

PROD 1.4.8 R

[deleted]2

PROD 1.4.9 G

[deleted]2

1

Interaction of PROD 4 and the RPPD Guide

PROD 1.4.10 G

1A firm to which PROD 4 applies need not apply the guidance in RPPD for matters covered by PROD if the firm has complied with PROD 4 (see also PROD 4.4.2G). PROD 4.4 includes guidance based on the RPPD which firms subject to PROD 4 should apply.

PROD 1.5 Application of PROD 5

General: Who? What?

PROD 1.5.1 R

1 PROD 5 applies to a firm which:

  1. (1)

    offers to sell an extended warranty to a customer; or

  2. (2)

    refers, invites or induces a customer to obtain an extended warranty from a person connected to the firm;

in connection with the entering into of a rent-to-own agreement with the firm.

PROD 1.5.2 G

1A person connected to the firm includes someone who has a relevant business relationship with the firm.

Where?

PROD 1.5.3 R

1 PROD 5 applies to a firm with respect to activities carried on from an establishment maintained by it, or its appointed representative, in the United Kingdom.

PROD 1.5.4 R

[deleted]2

PROD 1.5.5 G

[deleted]2

1
PROD 1.5.6 G

[deleted]2

1
PROD 1.5.7 G

[deleted]2

1

PROD 1.6 Application of PROD 6

PROD 1.6.1 R

1 2 PROD 6 applies to a firm:

  1. (1)

    that manufactures or distributes pathway investments in connection with its operating of a retail client’s personal pension scheme or stakeholder pension scheme;

  2. (2)

    within the scope of PROD 4 when manufacturing pathway investments, other than in connection with its operating of a retail client’s personal pension scheme or stakeholder pension scheme, as guidance with respect to that manufacturing activity;

  3. (3)

    within the scope of PROD 3 when manufacturing pathway investments, other than in connection with its operating of a retail client’s personal pension scheme or stakeholder pension scheme, as guidance with respect to that manufacturing activity.