Related provisions for COBS 20.2.57
The provisions of COBS in the table do not apply to a trustee firm to which this section applies:
COBS |
Description |
26.1A |
Adviser charging and remuneration |
26.1B |
Retail investment product provider requirements relating to adviser charging and remuneration |
26.2A |
Describing advice services |
6.3 |
Disclosing information about services, fees and commission - packaged products |
6.4 |
Disclosure of charges, remuneration and commission |
9.4 |
Suitability reports |
9.6 |
Special rules for providing basic advice on a stakeholder product |
16.3.9 |
Guidance on contingent liability transaction |
16.5 |
Quotations for surrender values |
16.6 |
Life insurance contracts - communications to clients |
16 Annex 1 R (1) 14 |
Information to be provided in accordance with COBS 16.2.1 R and 16.3 |
The provisions of COBS in the table are unlikely to be relevant in relation to a trustee firm to which this section applies:
COBS |
Description |
5 |
Distance communications |
13 |
Preparing product information |
14.2 |
Providing product information |
15 |
Cancellation |
17 |
Claims handling for long-term care insurance |
18.2 |
Energy market activity and oil market activity |
18.3 |
Corporate finance business |
18.4 |
Stock lending activity |
19 |
Pensions - supplementary provisions |
20 |
With-profits |
5A certified restricted investor is an individual who has signed, within the period of twelve months ending with the day on which the communication is made, a statement in the following terms:
“RESTRICTED INVESTOR STATEMENT I make this statement so that I can receive promotional communications relating to non-readily realisable securities as a restricted investor. I declare that I qualify as a restricted investor because: |
|
(a) |
in the twelve months preceding the date below, I have not invested more than 10% of my net assets in non-readily realisable securities; and |
(b) |
I undertake that in the twelve months following the date below, I will not invest more than 10% of my net assets in non-readily realisable securities. |
Net assets for these purposes do not include: |
|
(a) |
the property which is my primary residence or any money raised through a loan secured on that property; |
(b) |
any rights of mine under a qualifying contract of insurance; or |
(c) |
any benefits (in the form of pensions or otherwise) which are payable on the termination of my service or on my death or retirement and to which I am (or my dependants are), or may be entitled. |
I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from an authorised person who specialises in advising on non-readily realisable securities. Signature: Date:” |
A consumer has a right to cancel any of the following contracts with a firm:
Cancellable contract |
Cancellation period |
Supplementary provisions |
Life and pensions: |
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• a life policy (including a pension annuity, a pension policy or within a wrapper) • a contract to join a personal pension scheme or a stakeholder pension scheme • a pension contract • a contract for a pension transfer • a contract to vary an existing personal pension scheme or stakeholder pension scheme by exercising, for the first time, an option to make income withdrawals , |
30 calendar days |
For a life policy effected when opening or transferring a wrapper, the 30 calendar day right to cancel applies to the entire arrangement For a contract to buy a unit in a regulated collective investment scheme within a pension wrapper, the cancellation right for 'non-life/pensions (advised but not at a distance)' below may apply Exemptions may apply (see COBS 15 Annex 1 ) |
Cash deposit ISAs: |
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• a contract for a cash deposit ISA |
14 calendar days |
Exemptions may apply (see COBS 15 Annex 1 ) |
Non-life/pensions (advised but not at a distance): a non-distance contract ... |
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• to buy a unit in a regulated collective investment scheme (including within a wrapper or pension wrapper) • to open or transfer a child trust fund (CTF) • to open or transfer an ISA • for an Enterprise Investment Scheme 2 |
14 calendar days |
These rights arise only following a personal recommendation of the contract (by the firm or any other person).2 For a unit bought when opening or transferring a wrapper or pension wrapper, the 14 calendar day right to cancel applies to the entire arrangement.2 Exemptions may apply (see COBS 15 Annex 1 ).2 |
Non-life/pensions (at a distance): a distance contract, relating to ... |
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14 calendar days |
Exemptions may apply (see COBS 15 Annex 1 ) |
[Note: article35 of the Consolidated Life Directive, article 6(1) of the Distance Marketing Directive]
Table: Issues to be covered in PPFM
Subject |
Issues |
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(1) |
Amount payable under a with-profits policy |
(a) |
Methods used to guide determination of the amount that is appropriate to pay individual with-profits policyholders, including: |
|
(i) |
the aims of the methods and approximations used; |
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(ii) |
how the current methods, including any relevant historical assumptions used and any systems maintained to deliver results of particular methods, are documented; and |
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(iii) |
the procedures for changing the current method or any assumptions or parameters relevant to a particular method. |
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(b) |
Approach to setting bonus rates. |
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(c) |
Approach to smoothing maturity payments and surrender payments, including: |
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(i) |
the smoothing policy applied to each type of with-profits policy; |
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(ii) |
the limits (if any) applied to the total cost of, or excess from, smoothing; and |
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(iii) |
any limits applied to any changes in the level of maturity payments between one period to another. |
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(2) |
Investment strategy |
Significant aspects of the firm's investment strategy for its with-profits business or, if different, any with-profits fund, including: |
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(a) |
the degree of matching to be maintained between assets relevant to with-profits business and liabilities to with-profits policyholders and other creditors; |
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(b) |
the firm's approach to assets of different credit or liquidity quality and different volatility of market values; |
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(c) |
the presence among the assets relevant to with-profits business of any assets that would not normally be traded because of their importance to the firm, and the justification for holding such assets; and |
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(d) |
the firm's controls on using new asset or liability instruments and the nature of any approval required before new instruments are used. |
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(3) |
Business risk |
The exposure of the with-profits business to business risks (new and existing), including the firm's: |
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(a) |
procedures for deciding if the with-profits business may undertake a particular business risk; |
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(b) |
arrangements for reviewing and setting a limit on the scale of such risks; and |
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(c) |
procedures for reflecting the profits or losses of such business risks in the amounts payable under with-profits policies. |
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(4) |
Charges and expenses |
(a) |
The way in which the firm applies charges and apportions expenses to its with-profits business, including, if material, any interaction with connected firms. |
|
(b) |
The cost apportionment principles that will determine which costs are, or may be, charged to a with-profits fund and which costs are, or may be, charged to the other parts of its business of its shareholders. |
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(5) |
Management of inherited estate |
Management of any inherited estate and the uses to which the firm may put that inherited estate. |
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(6) |
Volumes of new business and arrangements on stopping taking new business |
If a firm'swith-profits fund is accepting new with-profits business, its practice for review of the limits on the quantity and type of new business and the actions that the firm would take if it ceased to take on new business of any significant amount. |
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(7) |
Equity between the with-profits fund and any shareholders |
The way in which the interests of with-profits policyholders are, or may be, affected by the interests of any shareholders of the firm. |
Table: Guidance on with-profits principles and practices
Reference to PPFM issues (COBS 20.3.6R) |
With-profits principles |
With-profits practices |
(1) Amount payable under a with-profits policy |
General (a) Circumstances under which any historical assumptions or parameters, relevant to methods used to determine the amount payable, may be changed; |
General (e) For each major class of with-profits policy, methods establishing the main assumptions or parameters that decide the output of methods that determine the amount payable; (f) Degree of approximation allowed when assumptions or parameters are applied across generations of with-profits policyholders or across different types or classes of with-profits policies; (g) Formality with which the methods, parameters or assumptions used are documented; (h) Target range, or target ranges, that have been set for maturity payments; (i) Factors likely to be regarded as relevant to address policyholders' interests or security when determining excess surplus; and Investment return, expenses or charges and tax (j) How investment return, expenses or charges and tax are brought into account and how the impact of those items is determined on the amount payable. In particular:
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Bonus rates (b) General aims in setting bonus rates and the constraints to which the firm may be subject in changing economic circumstances; (c) How the range of with-profits policies or generations of with-profits policies over which the firm believes a single bonus rate would be appropriate is determined and the circumstances under which it believes a new bonus series would be necessary; and |
Bonus rates (k) Current approach to setting bonus rates, including the weight given to recent economic experience. For final bonus rates, the description should include any distinctions made between with-profits policies that remain in force until contractual dates, or dates on which no market value reduction applies (for example, maturity or retirement dates) and policies that are surrendered or transferred at other dates; (l) Frequency at which bonus rates are re-set or expected to be re-set and the circumstances under which changes in the economic environment would cause the time between re-setting to change; (m) Maximum amount by which annual bonuses would alter if annual bonus rates were reset; (n) Approach to setting any interim bonus rates before the next declaration of annual bonus rates; (o) Relationship or interaction between final bonus rates and any market value reductions, if both can apply at the same time; (p) How final bonus rates influence the value of with-profits policies that have formulaic surrender or transfer bases (for example, older conventional policies rather than unitised policies); and |
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Smoothing (d) Statement as to whether smoothing is intended to be neutral over time. |
Smoothing (q) Any differences in approach for:
|
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(2) Investment strategy |
(a) How the types, classes or mix of assets are determined; and (b) Strategy in respect of derivatives and other instruments. |
(c) Whether and to what extent there is hypothecation of assets; (d) Period between formal reviews of investment strategy; (e) Approach to investment in different asset classes, and assets of different credit or liquidity quality, including assets not normally traded; and (f) Details of any external support available to the with-profits fund and how this affects the investment strategy. |
(3) Business risk |
(a) Where a firm explicitly excludes business risk from a class of with-profits policies but there are residual risks, clarification where these risks such as guarantee and smoothing costs are borne; and (b) Define where compensation costs from a business risk would be borne. |
(c) Current limits which apply to the taking on of business risk; and (d) Whether and to what extent particular generations of with-profits policyholders or classes of with-profits policies bear or might bear particular business risks, including for example, crystallised or contingent guarantees to other classes of policyholders or whether the out-turn from all business risk is pooled across all with-profits policies. |
(4) Charges and expenses |
(a) Factors that would drive any change to the basis on which the firm applies charges to or apportions its actual expenses amongst with-profits policies, or exercises any discretion to apply charges to particular with-profits policies. |
(b) Charges currently applied and the expenses currently apportioned to major classes of with-profits policies; (c) Relationship between the firm's actual charges and expenses, as applied to determine the amounts payable under with-profits policies, and the charges and expenses borne by the with-profits fund; (d) Circumstances under which expenses will be charged to the with-profits fund at an amount other than cost, and the reasons why; and (e) Interval for reviewing any arrangements for out-sourced services, including those provided by connected parties, giving a broad indication of the terms for termination. |
(5) Management of inherited estate |
(a) Preferred size or scale of inherited estate and implications for the values of the with profits policies; and (b) Any existing division of the inherited estate between with-profits funds; and (c) Any constraints on the freedom to deal with the inherited estate as a result of previous dealings. |
(d) How the inherited estate is used, for example, in meeting costs; (e) Whether the investment strategy for the inherited estate differs from the rest of the with-profits fund; and (f) Any current guidelines in place as to the size or scale of the inherited estate or as to how and over what time period the inherited estate would be managed, if it becomes too large or too small. |
(6) Equity between the with-profits fund and any shareholders |
(a) Arrangements for, and any changes to, profit sharing between shareholders and with-profits policyholders. |
(b) Current basis on which profit between with-profits policyholders and shareholders is divided; and (c) Whether the pricing of any policies being written, and particular policies open to new business, appear to be significantly and systematically reducing the inherited estate if the shareholder transfer is taken into account. |
The provisions of COBS in the table do not apply in respect of any corporate finance business carried on by a firm which is MiFID or equivalent third country business:
COBS |
Description |
Adviser charging and remuneration |
|
Retail investment product provider requirements relating to adviser charging and remuneration |
|
Describing advice services |
|
Disclosing information about services, fees and commission - packaged products |
|
Disclosure of charges, remuneration and commission |
|
Suitability reports |
|
Special rules for providing basic advice on a stakeholder product |
|
Use of dealing commission |
|
Recording telephone conversations and electronic communications |
|
Guidance on contingent liability transaction |
|
Quotations for surrender values |
|
Life insurance contracts - communications to clients |
|
Information to be provided in accordance with COBS 16.2.1 R and 16.3 |
The provisions of COBS in the table are unlikely to be relevant to any corporate finance business carried on by a firm which is MiFID or equivalent third country business:
COBS |
Description |
Distance communications, except in relation to distance contracts concluded with consumers |
|
Insurance mediation |
|
Preparing product information |
|
Providing product information |
|
Cancellation, except cancellation and withdrawal rights in relation to distance contracts concluded with consumers |
|
Claims handling for long-term care insurance |
|
Trustee firms' regime |
|
Energy market activity and oil market activity |
|
Stock lending activity |
|
Pensions - supplementary provisions |
|
With-profits |