SIFA 9.15 Key Features

Consumers need key features so that they can understand the product and compare it with different packaged products. The COB 6 requirements expand on Principle 7 that requires a firm to pay due regard to the information needs of its customers.

At the core of the regime is the Key Features Document (KFD) that your firm must give to consumers before they complete an application for any packaged product or cash deposit ISA. A direct offer financial promotion for a packaged product must also contain key features information (COB 3.9.10 R). Product providers must produce key features for every packaged product that they provide. Under the rules set out in COB 6.5, all KFDs should be split into a number of sections and the information disclosed will vary depending on the type of product. COB 6.4 explains the product disclosure required in some special situations.

KFDs must contain an illustration of the effect of charges over time on what the consumer might get back (COB 6.5.24 R and COB 6.5.31 R). In many cases, mainly for life products, an additional illustration is required to show the investor what he might get back assuming set rates of return (COB 6.5.15 R). Your firm may provide these illustrations in a document separate from the main text of the KFD but you should present the documents at the same time.

When the business with the customer is carried out at a distance, and falls under the definition of a distance contract, as well as the KFD you must also send the customer the terms and conditions of the contract and all the information set out in COB Appendix 1. You do not need to put all this information in one document, as long as you give it all to the customer in a durable medium at the same time as you provide the KFD (COB 6.5.2 R (6)).

If a consumer has responded to a direct offer financial promotion, the information package you send should contain example-based key features documents. There is no need to provide a further set of key features for this transaction (COB 6.2.8 G).

When you carry out business with the customer on the telephone, you must give them certain information about your firm and why you are calling (COB 6.4.27 R). Instead of providing the customer with the KFD before they are bound by the contract, which is the rule set out in COB 6.5.2 R (6), you can give the customer some of this information on the telephone and send the KFD afterwards. But the customer must agree to this.

For the rules relating to the provision of KFDs when there are variations to existing life policies, please refer to COB 6.2.16 R to COB 6.2.19 R.

COB 6.2.12 R deals with the provision of revised key features where the terms of a proposed life policy are subsequently altered before the private customer completes the application form.

In PS05/4 we set out final rules and guidance (COB 6.6) for implementing European requirements on product disclosure information for consumers in relation to collective investment schemes such as unit trusts and OEICS that hold a UCITS certificate enabling them to be marketed in other EEA countries.

The product information will be contained in a new document known as the Simplified Prospectus. EU rules require this document to be offered to anyone who wants to invest in a collective investment scheme that holds a UCITS certificate.

Our approach builds on the existing Key Features document by adding new information requirements only where it is necessary to meet EU standards. The new rules and guidance came into effect on 1 May 2005. However, transitional relief is granted until 30 September 2005 where the existing Key Features regime is still to be followed.

You are reminded that key features are a form of financial promotion and are subject to the rules contained in COB 3. Also see section 9.3 of the Guide.