Related provisions for MCOB 3A.1.10
21 - 40 of 133 items.
In addition to the general application rule for this sourcebook, this section applies to the communication, or approval for communication, to a person in the United Kingdom of a financial promotion of a non-investment insurance contract unless it can lawfully be communicated by an unauthorised communicator without approval.
(1) Before a firmapproves a financial promotion it must take reasonable steps to ensure that the financial promotion is clear, fair and not misleading.(2) If, subsequently, a firm becomes aware that a financial promotion is not clear, fair and not misleading, it must withdraw its approval and notify any person that it knows to be relying on its approval as soon as reasonably practicable.
(1) This guidance applies in relation to a financial promotion that makes pricing claims, including financial promotions that indicate or imply that a firm can reduce the premium, provide the cheapest premium or reduce a customer's costs.(2) Such a financial promotion should:(a) be consistent with the result reasonably expected to be achieved by the majority of customers who respond, unless the proportion of those customers who are likely to achieve the pricing claims is stated
1A firm which communicating or approving a financial promotion within MCOB 3A.2.4 R must, in addition, ensure that the financial promotion:(1) is accurate;(2) is balanced and, in particular, does not emphasise any potential benefits of the MCD regulated mortgage contract, other qualifying credit, home reversion plan or regulated sale and rent back agreement without also giving a fair and prominent indication of any relevant risks;(3) is sufficient for, and presented in a way that
A financial promotion is not a solicited financial promotion unless a firm ensures that: (1) it is clear from all the circumstances when the call, visit or dialogue is initiated or requested that, during the course of the visit, call or dialogue, a financial promotion would be made; and(2) a person is not to be treated as expressly requesting a call, visit or dialogue:(a) because they omit to indicate that they do not wish to receive any or any further visits or calls or to engage
If a financial promotion is solicited by a person (“R”), it is treated as also having been solicited by any other person to whom it is made at the same time as R if that other person is a close relative of R or is expected to enter into a home reversion plan, a regulated sale and rent back agreement or any contract for qualifying credit jointly with R.
A person who is concerned to know whether his communications will require approval or, if he is an authorised person, whether the appropriate financial promotion rules1 will apply to his communications will need to consider the following:1(1) am I making a communication or causing a communication to be made? (see PERG 8.6);(2) if so, is it an invitation or inducement? (see PERG 8.4);(3) if so, does the invitation or inducement relate to a controlled investment? (see PERG 8.7);(4)
The restriction in section 21 applies to all forms of communication such as advertising, broadcasts, websites, e-mails and all other forms of written or oral communication whether sent to one person or many. However, the restrictions only apply to a communication made in the course of business and not, for example, to personal communications between individuals.
The basic restriction on the communication of financial promotions is in section 21(1) of the Act. Sections 21(2) and (5) disapply the restriction in certain circumstances. Their combined effect is that a person must not, in the course of business, communicate an invitation or inducement to engage in investment activity unless:(1) he is an authorised person; or(2) the content of the communication is approved for the purposes of section 21 by an authorised person; or(3) the communication
Section 21 of the Act does not itself (other than in its heading and side-note) refer to a ‘financial promotion’ but rather to the communication of ‘an invitation or inducement (a)1 to engage in investment activity or (b) to engage in claims management activity1’. References in this guidance to a financial promotion mean an invitation or inducement to engage in investment activity or to engage in claims management activity1.
The test for whether the contents of a particular website may or may not involve a financial promotion is no different to any other medium. If a website or part of a website, operated or maintained in the course of business, invites or induces a person to engage in investment activity or to engage in claims management activity2, it will be a financial promotion. The FCA takes the view that the person who caused the website to be created will be a communicator. So, any software
The Internet also allows hypertext links, where two different sites in the Internet can be connected almost instantaneously by simply clicking on the link. The FCA's1 views on the position of hypertext links (which should be read with the remainder of PERG 8, especially PERG 8.4 (Invitation or inducement)) are as follows.1(1) A hypertext link may or may not be a financial promotion in itself. This will depend on the nature of the hypertext link and the context in which it is placed.
Section 21(3) of the Act states that, in the case of a communication originating outside the United Kingdom, the restriction in section 21(1) applies only if it is capable of having an effect in the United Kingdom. In this respect, it is irrelevant whether the communication has an effect provided it is capable of doing so.
This appears to give a potentially broad jurisdictional scope to section 21. It seems clear that a communication which originates overseas will be capable of having an effect in the United Kingdom if it is an invitation or inducement to engage in investment activity which is communicated to a person in the United Kingdom. It would seem that communications made in other circumstances may also be capable of having an effect in the United Kingdom. However, the exemption for communications
Where communications by persons in another EEA State are made to or directed at persons in the United Kingdom account must be taken of the effect of any relevant EU Directives. For example, the E-Commerce Directive will, with limited exceptions, prevent the United Kingdom from imposing restrictions on incoming financial promotions in information society services. The Treasury has given effect to this through the Financial Promotion Order (see1PERG 8.12.38 G). Other potentially
Where collective investment schemes are concerned additional restrictions are placed on their promotion to ensure that only those which are regulated are promoted to the general public. This is achieved by a combination of sections 21 and 238 (Restrictions on promotion) of the Act as explained in PERG 8.20.2 G. A regulated collective investment scheme is:(1) an authorised unit trust scheme; or(1A) an authorised contractual scheme; or7(2) an investment company with variable capital;
Section 21 precludes the promotion by unauthorised persons of unregulated collective investment schemes unless the financial promotion is approved by an authorised person or is exempt. Section 238 then precludes the promotion of an unregulated collective investment scheme by authorised persons except where:(1) there is an exemption in an order made by the Treasury under section 238(6); or(2) the financial promotion is permitted under rules made by the FCA under section 238(5)
7(1) The Treasury has made an order under section 238(6). This is the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (as amended by article 3 of the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2001 (SI 2001/2633), by articles 7 to 10 of the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) (Electronic Commerce Directive) Order 2002 (SI 2002/2157) and, by article
The FCA has made rules under section 238(5) which allow authorisedfirms to communicate or approve a financial promotion for an unregulated collective investment scheme in certain specified circumstances. These circumstances are set out in COBS 4.12.4 R3 To date, the Treasury has not made an order exempting single property schemes under section 239.23
The controls under the Act that apply to promotions of shares or securities by unauthorised persons are in section 21 of the Act (Restrictions on financial promotion). These controls apply where an unauthorised person makes a financial promotion in, or from, the United Kingdom that relates to the shares in or securities of any body corporate. The same controls apply regardless of whether the shares or securities being promoted are issued by a body corporate that is an open-ended
Promotions made by authorised persons in the United Kingdom are generally subject to the controls inCOBS 4 (Communicating with clients, including financial promotions).3 However, in the case of shares in, or securities of, a body corporate which is an open-ended investment company, additional controls are imposed by Chapter II of Part XVII of the Act (Restrictions on promotion of collective investment schemes) (see PERG 8.20). Section 238 of the Act (Restrictions on promotion)
There are a number of other exemptions in the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (SI 2001/1060). In general terms, these exemptions are equivalent to the exemptions from section 21 of the Act that apply to units. There is guidance on those exemptions in PERG 8.20.3 G (Additional restriction on the promotion of collective investment schemes).
The FCA has also made rules under section 238(5) which allow authorised persons to communicate or approve a financial promotion for an open-ended investment company that is an unregulated collective investment scheme (that is, one that does not fall within PERG 9.10.4 G). The circumstances in which such a communication or approval is allowed are explained in COBS 4.12.4 R535
Controlled activity and controlled investment are defined in Schedule 1 to the Financial Promotion Order and are listed in PERG 8.36.3 G and PERG 8.36.4 G. Broadly speaking, controlled activities and controlled investments are similar to regulated activities and specified investments under the Regulated Activities Order. However, with controlled activities, the exclusions set out in the Regulated Activities Order do not, in most cases, apply. It is important to note, however,
The overall effect is that a financial promotion must relate in some way to a controlled investment and may be summarised as the communication, in the course of business, of an invitation or inducement to:(1) acquire, dispose of or underwrite certain investments or exercise rights conferred by such an investment for such purpose or for the purpose of converting it; or(2) receive or undertake investment services such as dealing in investments as principal or as agent, managing
So a financial promotion will not include an invitation or inducement to:(1) refrain from doing any of the things in PERG 8.7.3 G; or(2) exercise rights conferred by an investment other than to acquire, dispose of, underwrite or convert an investment.This means that most invitations or inducements to exercise voting rights will not be financial promotions.
In the FCA's opinion, section 21 will apply to a communication (made in the course of business) if it contains an invitation or inducement to engage in investment activity which is addressed to a particular person or to persons generally. Where this is the case, it will not matter that the communication may be physically delivered to someone other than the person who is intended to engage in investment activity. PERG 8.6.10 G gives more guidance on this.
The exemptions in Part V of the Financial Promotion Order concern financial promotions relating to deposits and contracts of insurance2. The exemptions may be combined with exemptions in Part IV and1 Part VI (see PERG 8.11.3 G (Types of exemption under the Financial Promotion Order).1 The exemptions in Part V do not apply to life policies or structured deposits.21
Part V provides two kinds of exemption of a general nature and one specific exemption. The exemptions of a general nature are:(1) any form of real time financial promotion (articles 23 (Deposits: real time communications) and 26 (Relevant insurance activity; real time communications)); and(2) non-real time financial promotions containing certain specified information including the name, country of incorporation (if relevant) and principal place of business of the deposit-taker
The purpose of this guidance is three-fold:11(1) to outline the restriction on financial promotion under section 21 of the Act (Restrictions on financial promotion) and the main exemptions from this restriction; and(2) to outline the main circumstances in which persons who are primarily involved in making or helping others to make financial promotions may be conducting regulated activities requiring authorisation or exemption themselves; this part of the guidance may also be of
In particular, this guidance covers:(1) invitations and inducements (see PERG 8.4);(2) meaning of 'in the course of business' (see PERG 8.5);(3) meaning of 'communicate' (see PERG 8.6);(4) meaning of 'engage in investment activity' (see PERG 8.7);(4A) meaning of ‘engage in claims management activity’ (see PERG 8.7A);2(5) meaning of 'having an effect in the United Kingdom' (see PERG 8.8);(6) circumstances where the restriction in section 21 does not apply (see PERG 8.9);(7) types
COBS does not apply to an authorised professional firm with respect to its non-mainstream regulated activities, except that:(1) the fair, clear and not misleading rule applies;(2) the financial promotion rules apply as modified below;(3) the rules in the following parts of COBS which implement the IDD apply in relation to insurance distribution activities:3(a) COBS 2.1.1R, COBS 2.2A and COBS 2.3A (Conduct of business obligations);3(b) COBS 4 (Communicating with clients, including
The financial promotion rules do not apply to an authorised professional firm in relation to the communication of a financial promotion if:(1) the firm's main business is the practice of its profession (see IPRU(INV) 2.1.2R(3));(2) the financial promotion is made for the purposes of and incidental to the promotion or provision by the firm of its professional services or its non-mainstream regulated activities; and(3) the financial promotion is not communicated on behalf of another
Section 21(2) of the Act sets out two circumstances in which a financial promotion will not be caught by the restriction in section 21(1). These are where the communicator is an authorised person or where the content of the financial promotion has been approved for the purposes of section 21 by an authorised person. Where approval is concerned it must be specifically for the purposes of enabling the financial promotion to be communicated by unauthorised persons free of the restriction
Where an authorised person makes a financial promotion, he is not subject to the restriction in section 21. So, the communication of the financial promotion by the authorised person will not be a criminal offence under the provisions of section 25 of the Act (Contravention of section 21) and any resulting contract will not be unenforceable under section 30 of the Act (Enforceability of agreement resulting from unlawful communications). However, the appropriate financial promotion
An unauthorised person may wish to pass on a financial promotion made to him by an authorised person. In this case, the fact that the financial promotion was made to him by an authorised person will not be enough for the restriction in section 21 not to apply to him. The authorised person must also both have approved its content and have done so for the purpose of section 21 of the Act. If an authorised person wishes to ensure that an unauthorised person can communicate a financial
With approval generally, issues may arise as to what would be subject to the restrictions in section 21 where an invitation or inducement to engage in investment activity or to to engage in claims management activity4 is made through a publication, broadcast or website or is accompanied by other material. In any such instances, it is necessary to consider the circumstances in which the financial promotion is made. For example, where a financial promotion takes the form of an advertisement
(1) A firm must ensure that a communication or a financial promotion is fair, clear and not misleading.(2) This rule applies in relation to:(a) a communication by the firm to a customer6 in relation to designated investment business which is not MiFID, equivalent third country or optional exemption business,7 other than a third party prospectus;(aa) 6a communication to an eligible counterparty that is in relation to:8(i) MiFID or equivalent third country business other than a
A firm should ensure that a financial promotion:(1) for a product or service that places a client's capital at risk makes this clear;(2) that quotes a yield figure gives a balanced impression of both the short and long term prospects for the investment;(3) that promotes an investment or service whose charging structure is complex, or in relation to which the firm will receive more than one element of remuneration, includes the information necessary to ensure that it is fair, clear
2A communication or a financial promotion should not describe a feature of a product or service as “guaranteed”, “protected” or “secure”, or use a similar term unless:24(1) that term is capable of being a fair, clear and not misleading description of it; and(2) the firm communicates all of the information necessary, and presents that information with sufficient clarity and prominence, to make the use of that term fair, clear and not misleading.45
The exemptions in Part IV of the Financial Promotion Order (Exempt communications: all controlled activities) will apply to financial promotions about qualifying credit . Some of the exemptions in Part VI of the Financial Promotion Order (Exempt communications: certain controlled activities) will also apply. Those of particular note are referred to in PERG 8.17.10 G to PERG 8.17.12 G.2
Article 46 (Qualifying credit to bodies corporate) exempts any financial promotion about providing qualifying credit (or relevant consumer credit or consumer hire)4 if it is:(1) made to or directed at bodies corporate only; or(2) accompanied by an indication that the qualifying credit to which it relates is only available to bodies corporate.
Article 28B (Real time communications: introductions) exempts a real time financial promotion that relates to one or more of the controlled activities about regulated mortgage contracts, as well as home reversion plans, home purchase plans,4regulated sale and rent back agreements3, certain consumer hire agreements and relevant credit agreements4. The exemption is subject to the following conditions being satisfied:224(1) the financial promotion must be made for the purpose of,
4CONC 3 contains rules about financial promotions relating to credit-related regulated activity. CONC 3 does not apply, however, to the communication, or approval for communication, of a financial promotion to the extent it concerns qualifying credit. MCOB 3A5 applies to the communication or approval of a financial promotion of qualifying credit. This means that a financial promotion about credit will not usually be subject to both MCOB 3A5 and CONC 3 unless it is about secured
4Guide to potential application of MCOB 3A5 and CONC 3 to financial promotion of credit. This table belongs to PERG 8.17.20 G.
5Subject of promotion |
5 | CONC 3 may apply |
|
(1) |
Yes |
No |
|
(2) |
credit agreements secured on land where the lender also enters into regulated mortgage contracts as lender |
Yes |
No |
(3) |
credit agreements not secured on land, whether or not the lender also enters into regulated mortgage contracts as lender |
No |
Yes |
(4) |
credit agreements secured on land where the lender does not enter into regulated mortgage contracts as lender |
No |
Yes |
(5) |
credit agreements partly secured on land that include some unsecured credit and where the lender enters into regulated mortgage contracts as lender |
Yes |
No |
(6) |
credit agreements with features as in (1), (2) or (5) promoted in combination with other unsecured credit agreements |
Yes |
Yes |
(1) A firm must, in any relevant communication, indicate the extent of its powers, in particular whether it works exclusively with one or more lenders (including, for example, if it works exclusively with lenders who are participants in the electronic system that the firm operates) or whether it works as an independent broker.[Note: article 21(a) of the Consumer Credit Directive](2) In this rule, a “relevant communication” means a financial promotion or a document which:(a) is
The rules in this chapter adopt various concepts from the restriction on financial promotions by unauthorised persons in section 21(1) of the Act (Restrictions on financial promotion). Guidance on that restriction and the communications which are exempt from it is contained in PERG 8 (Financial promotion and related activities) and that guidance will be relevant to interpreting these rules. In particular, guidance on the meaning of:(1) 'communicate' is in PERG 8.6 (Communicate);
1For the purposes of this chapter, information or a statement included in a financial promotion or communication will not be treated as prominent unless it is presented, in relation to the other content of the financial promotion or communication, in such a way that it is likely that the attention of the average customer to whom the financial promotion or communication is directed would be drawn to it.
A person involved in insurance business written at Lloyd’s may be making financial promotions when attracting another person:(1) to effect or carry out contracts of insurance written at Lloyd’s (where the controlled activity which is the subject of the financial promotion is effecting and carrying out contracts of insurance); or(2) to have assets held under funds at Lloyd’s (where the controlled activity may involve dealing in securities and contractually based investments, arranging
Most persons making financial promotions as referred to in this section 1are likely to be authorised persons. As such they will be subject to the appropriate financial promotion rules1. Any persons who are making financial promotions as referred to in PERG 8.18.1 G and who do not need to be authorised persons will need to ensure that their financial promotions are approved by an authorised person or that a specific exemption applies (see PERG 8.13).1
A financial promotion for an overseas long-term insurer, which has no establishment in the United Kingdom, must include:(1) the full name of the overseas long-term insurer, the country where it is registered, and, if different, the country where its head office is situated;(2) a prominent statement that 'holders of policies issued by the company will not be protected by the Financial Services Compensation Scheme if the company becomes unable to meet its liabilities to them'; and(3)
A financial promotion for an overseas long-term insurer which is authorised to carry on long-term insurance business in any country or territory listed in paragraph (c) of the Glossary definition of overseas long-term insurer must also include:(1) the full name of any trustee of property of any description which is retained by the overseas long-term insurer in respect of the promoted contracts;(2) an indication whether the investment of such property (or any part of it) is managed
If a financial promotion relates to a life policy with an overseas long-term insurer but does not name the overseas long-term insurer by giving its full name or its business name:(1) it must include the following prominent statement: "This financial promotion relates to an insurance company which does not, and is not authorised to, carry on in any part of the United Kingdom the class of insurance business to which this promotion relates. This means that the management and solvency