SIFA 9.13 Disclosing charges, remuneration & commission

Before you conduct business with or for private customers, you must communicate in writing ( COB 5.7.3 R(1)):

1. (1)

   the basis or amount of charges you will charge them for conducting the business; and

2. (2)

   the nature or amount of any other income you or your associate will receive.

'Associate' has a wide meaning and you should consider the definition in the Handbook glossary.

The purpose of this requirement is to ensure that you make each private customer aware of the direct or indirect costs he/she will have to pay for financial services. This is so that they are in a better position to make informed choices ( COB 5.7.2 G).

This is in line with Principle 7 (Communications with clients) which requires you to pay due regard to the information needs of your clients and communicate information to them in a clear, fair and not misleading way.

You can disclose the required information in a terms of business, in a client agreement, or in a separate written statement. When you advise private customers on packaged products, product-related charges and expenses are normally disclosed in a key features document ( COB 5.7.4 G).

The following sections of the Handbook are relevant:

1. (1)

   The requirements: COB 5.7

2. (2)

   Key features requirements are set out in COB 6.2 and COB 6.4 including disclosure of product charges.

3. (3)

   Disclosure of remuneration and commission for packaged products is covered by COB 5.7.5 R.

If you conduct business on an execution-only basis not for a packaged product, there are certain exceptions to the rules. Full details can be found at COB 5.7.3 R (2). Any income receivable by an associate also needs to be disclosed.