Related provisions for MCOB 2.6A.16
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Circumstances that a firm should consider include how the customer will be protected in the event of:(1) the failure of a reversion provider or home purchase provider;(2) the transfer of a reversion provider's or home purchase provider's interest (or the interest the provider would have had, had it not nominated a third party to hold it) in the property to a third party; (3) other dealings by a reversion provider or home purchase provider (or its nominee) with a third party; and(4)
The steps that a firm might take in order to protect its customer's interests will depend on a number of factors, including the nature and structure of the home purchase plan or home reversion plan and the jurisdiction in which the property is situated. If it is not possible to achieve reasonable protection (for example, due to impediments under a particular legal system) then a firm should not enter into, arrange or administer the plan.
(1) In the FSA's view, a customer's interests will include:(a) protection of the customer's rights under the plan, in particular the right to occupy the property throughout its term;(b) protection of any interest (legal or beneficial) that the customer retains, acquires or is intended to acquire in the property, including the expectation that such interests will be unencumbered by third party interests; and(c) that, where a customer pays sums under a home purchase plan towards
A firm is unlikely, for example, to be treating its customer fairly in relation to termination of a home purchase plan or home reversion plan if:(1) the grounds on which it may terminate all or part of a plan are unduly wide, or on which a customer may terminate are unduly narrow; or(2) the customer is not given appropriate notice of termination.
A firm is also unlikely to be treating its customer fairly if, upon termination of an agreement under a home purchase plan or home reversion plan, the customer does not receive (net of any reasonable sums payable by the customer):(1) in the case of a home reversion plan where the customer retains a beneficial interest in the property, the value of that beneficial interest; or(2) in the case of a home purchase plan, the value of purchase payments made.[Note: The terms of a home
A firm is unlikely, for example, to be treating a reversion occupier fairly if:(1) the reversion occupier is obliged to maintain the property to a standard which exceeds the standard that the property is in when the home reversion plan commences;(2) the reversion occupier is not entitled to, or is not given, reasonable notice of an inspection, or the inspection is conducted in a way that is biased against him;(3) unreasonable restrictions are imposed on who may occupy the property,
(1) A valuer may be considered competent if he is a suitably qualified member of a professional body.(2) A valuer may be considered independent if:(a) the customer can choose the valuer subject to the firm objecting on reasonable grounds and to the valuer being competent;(b) he owes a duty of care to the customer in valuing the property; and(c) the customer has an appropriate remedy against him under a complaints procedure which allows the complaint to be referred to an independent
A person may enter into a home reversion plan as provider without being regulated by the FSA (or an exempt person) if the person does not do so by way of business (see PERG 14.5). If a firmarranges for such a person to enter into a home reversion plan as provider, the firm will be responsible for ensuring that the reversion occupier's interests are protected to a reasonable standard, even if the reversion arranger is not acting for the reversion occupier. A reversion administrator
For the purposes of identifying the types of conflict of interest that arise, or may arise, in the course of providing a service and whose existence may entail a material risk of damage to the interests of a client, a common platform firm must take into account, as a minimum, whether the firm or a relevant person, or a person directly or indirectly linked by control to the firm:(1) is likely to make a financial gain, or avoid a financial loss, at the expense of the client;(2)
The circumstances which should be treated as giving rise to a conflict of interest cover cases where there is a conflict between the interests of the firm or certain persons connected to the firm or the firm'sgroup and the duty the firm owes to a client; or between the differing interests of two or more of its clients, to whom the firm owes in each case a duty. It is not enough that the firm may gain a benefit if there is not also a possible disadvantage to a client, or that one
A common platform firm must keep and regularly update a record of the kinds of service or activity carried out by or on behalf of thefirm in which a conflict of interest entailing a material risk of damage to the interests of one or more clients has arisen or, in the case of an ongoing service or activity, may arise.[Note:article 23 of MiFID implementing Directive]
A common platform firm must maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest as defined in SYSC 10.1.3 R from constituting or giving rise to a material risk of damage to the interests of its clients.[Note: article 13(3) of MiFID]
(1) If arrangements made by a common platform firm under SYSC 10.1.7 R to manage conflicts of interest are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of a client will be prevented, the firm must clearly disclose the general nature and/or sources of conflicts of interest to the client before undertaking business for the client.(2) The disclosure must:(a) be made in a durable medium; and(b) include sufficient detail, taking into
(1) The conflicts of interest policy must include the following content:(a) it must identify in accordance with SYSC 10.1.3 R and SYSC 10.1.4 R, by reference to the specific services and activities carried out by or on behalf of the common platform firm, the circumstances which constitute or may give rise to a conflict of interest entailing a material risk of damage to the interests of one or more clients; and(b) it must specify procedures to be followed and measures to be adopted
A number of the rules in this section require a firm to take into account its regulatory duty to treat customers fairly. In this section, references to such a duty are to a firm's duty to pay due regard to the interests of its customers and to treat them fairly (see Principle 6 in PRIN). This duty is owed to both policyholders and potential policyholders.
In the actuarial valuation under INSPRU 1.2.7 R, a firm must use methods and prudent assumptions which:(1) are appropriate to the business of the firm;(2) are consistent from year to year without arbitrary changes (see INSPRU 1.2.11 G);(3) are consistent with the method of valuing assets (see GENPRU 1.3);(4) include appropriate margins for adverse deviation of relevant factors (see INSPRU 1.2.12 G);(5) recognise the distribution of profits (that is, emerging surplus) in an appropriate
For the purpose of 3INSPRU 1.2.28R (1)(c)3, benefits payable include:(1) all guaranteed benefits including guaranteed surrender values and paid-up values;(2) vested, declared and allotted bonuses to which the policyholder is entitled;(3) all options available to the policyholder under the terms of the contract; and(4) discretionary benefits payable in accordance with the firm's regulatory duty to treat its customers fairly.
All cash flows are to be valued using prudent assumptions in accordance with generally accepted actuarial practice. Cash flows may be omitted from the valuation calculations provided the reserves obtained as a result of leaving those cash flows out of the calculation are not less than would have resulted had all cash flows been included (see INSPRU 1.2.22R (2)(b)2). Provision for future expenses in respect of with-profits insurance contracts (excluding accumulating with-profits
An additional provision for diseases covered by INSPRU 1.2.60G (5)(c) may be needed, in particular for unit-linked policies. In determining whether such a provision is needed a firm may take into consideration any ability to increase product charges commensurately (provided that such increase does not infringe on its regulatory duty to treat its customers fairly), but a provision would still be required for the period until such an increase could be brought into effect.
For the purposes of INSPRU 1.2.79R (2) and INSPRU 1.2.85 R, future surplus Future surplus may only be offset against future reinsurance cash outflow in respect of surplus on non-profit insurance contracts and the charges or shareholder transfers arising as surplus from with-profits insurance contracts. Such charges and transfers may only be allowed for to the extent consistent with the regulatory duty of the firm to treat its customers fairly.
Principle 6 (Customers' interests) requires a firm to pay due regard to the interests of its customers and treat them fairly. A firm may not exclude the duties it owes or the liabilities it has to a customer under the regulatory system. It may exclude other duties and liabilities only if it is reasonable for it to do so.
Principles 6 (Customers' interests), 7 (Communications with clients), 8 (Conflicts of interest), 9 (Customers: relationships of trust) and 10 (Clients' assets) impose requirements on firms expressly in relation to their clients or customers. These requirements depend, in part, on the characteristics of the client or customer concerned. This is because what is "due regard" (in Principles 6 and 7), "fairly" (in Principles 6 and 8), "clear, fair and not misleading" (in Principle
Principles 6, 8 and 9 and parts of Principle 7, as qualified by PRIN 3.4.1 R, apply only in relation to customers (that is, clients which are not market counterparties). The approach that a firm needs to take regarding classificationof clients into customers and market counterparties will depend on whether the firm is carrying on designated investment business or other activities, as described in PRIN 1.2.3 G and PRIN 1.2.4 G.
1(1) All firms, except those intending only to provide basic advice on a stakeholder product, are required by COB 4.1.4 R (Requirement to classify) to classify a client before conducting designated investment business with or for him, and that classification will be applicable for the purposes of Principles 6, 7, 8 and 9.1(2) The person to whom a firmprovides basic advice on a stakeholder product will be a private customer for all purposes including the purposes of Principles
1(1) The whole of COB 4.1 (Client classification) applies to a firm intending to conduct, or conducting, designated investment business other than providing basic advice on a stakeholder product and ancillary activities relating to designated investment business. Any client classificationsestablished in relation to such business will be applicable for the purposes of Principles 6, 7, 8 and 9.1(2) The person to whom a firmprovides basic advice on a stakeholder product will be
The purpose of MCOB 2.3.2 R(2) is to prevent the requirement in MCOB 2.3.2 R(1) being circumvented by an inducement being given or received by an unregulated associate. There may be circumstances, however, where a firm is able to demonstrate that it could not reasonably have knowledge of an associate giving or receiving an inducement. It should not, however, direct business to another person on the instruction of an associate if this is likely to conflict with the interests of
(1) MCOB 6 amplifies Principle 6 and Principle 7. The purpose of MCOB 6 is to ensure that a customer receives a clear offer document to enable him to check the features and price of thehome finance transaction1 before he enters into it. The offer document should include an updated and suitably adapted illustration (for a regulated mortgage contract) or financial information statement (for a home purchase plan)1 so that the customer can compare it with the one1 he received before
Territorial application of the Principles
Principle |
Territorial application |
Principles1, 2 and 3 |
in a prudential context, apply with respect to activities wherever they are carried on; otherwise, apply with respect to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom unless another applicable rule which is relevant to the activity has a wider territorial scope, in which case the Principle applies with that wider scope in relation to the activity described in that rule. |
applies with respect to activities wherever they are carried on. |
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if the activities have, or might reasonably be regarded as likely to have, a negative effect on confidence in thefinancial system operating in the United Kingdom, applies with respect to activities wherever they are carried on; otherwise, applies with respect to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom. |
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Principles 6, 7, 8, 9 and 10 |
Principle 8, in a prudential context, applies with respect to activities wherever they are carried on; otherwise apply with respect to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom unless another applicable rule which is relevant to the activity has a wider territorial scope, in which case the Principle applies with that wider scope in relation to the activity described in that rule. |
applies with respect to activities wherever they are carried on.2 |
(1) This chapter amplifies Principle 6 and Principle 7. 2(1A) 2This chapter requires information to be supplied to customers at the start of a2regulated mortgage contract to enable them to check that the regulated mortgage contract has been set up in accordance with their requirements and to notify them of the first and subsequent payments.2(2) Where a firm provides services to a customer in relation to a further advance, rate switch, or addition or removal of a party to a regulated
Principle 6 (Customers' interests) requires that a firm must pay due regard to the interests of its customers and treat them fairly. This means, for example, that a firm should avoid selling practices that commit customers (or lead customers to believe that they are committed) to any regulated mortgage contract or home reversion plan1 before they have been able to consider the illustration and offer document. One such practice might be to present a new customer with an illustration,