Related provisions for COBS 5.1.10

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COBS 11.4.1RRP
Unless a client expressly instructs otherwise, a firm must, in the case of a clientlimit order in respect of shares admitted to trading on a regulated market or traded on a trading venue2 which is not immediately executed under prevailing market conditions, take measures to facilitate the earliest possible execution of that order by making public immediately that clientlimit order in a manner which is easily accessible to other market participants. [Note: article 28(2)2 of Mi
COBS 11.4.2GRP
In respect of transactions executed between eligible counterparties, the obligation to disclose clientlimit orders should only apply where the counterparty is explicitly sending a limit order to a firm for its execution. [Note: recital 1052 to MiFID]
COBS 11.4.3EURP
[deleted]2
COBS 11.4.4GRP
[deleted]21
COBS 11.4.5RRP
The obligation in COBS 11.4.1R2 to make public a limit order is disapplied in respect of transactions that are2 large in scale compared with normal market as determined under article 4 of MiFIR2. [Note: article 28(2)2 of MiFID]
COBS 11.4.6GRP
[deleted]2
COBS 20.5.1RRP
1A firm must, in relation to each with-profits fund it operates:(1) appoint:(a) a with-profits committee; or(b) a with-profits advisory arrangement (referred to in this section as an ‘advisory arrangement’), but only if appropriate, in the opinion of the firm'sgoverning body, having regard to the size, nature and complexity of the fund in question;(2) ensure that the with-profits committee or advisory arrangement operates in accordance with its terms of reference; and(3) make
COBS 20.5.2GRP
(1) Ultimate responsibility for managing a with-profits fund rests with the firm through its governing body. The role of the with-profits committee or advisory arrangement is, in part, to act in an advisory capacity to inform the decision-making of a firm'sgoverning body. The with-profits committee or advisory arrangement also acts as a means by which the interests of with-profits policyholders are appropriately considered within a firm's governance structures. The with-profits
COBS 20.5.3RRP
A firm must ensure that the terms of reference contain, as a minimum, terms having the following effect:(1) the role of the with-profits committee or advisory arrangement is, as relevant, to assess, report on, and provide clear advice and, where appropriate, recommendations to the firm'sgoverning body on:(a) the way in which each with-profits fund is managed by the firm and, if a PPFM is required, whether this is properly reflected in the PPFM;(b) if applicable, whether the firm
COBS 20.5.4GRP
(1) The FCA expects that a with-profits committee will meet at least quarterly and ad hoc if required. (2) The FCA expects that, in general, a with-profits committee or advisory arrangement will work closely with the with-profits actuary, and obtain his opinion and input as appropriate.
COBS 20.5.5RRP
A firm must: (1) ensure that its governing body, in the context of its consideration of issues referred to in COBS 20.5.3R (1)(a) to (d) and (2)(b)(i) to (x):(a) obtains, as relevant, assessments, reports, advice and/or recommendations of the with-profits committee or advisory arrangement, if the governing body, the with-profits committee or advisory arrangement considers that significant issues concerning the interests of with-profits policyholders need to be considered by the
COBS 20.5.6GRP
(1) COBS 20.5.5R (2) requires that a firm provides a with-profits committee or advisory arrangement with sufficient resources. A with-profits committee or advisory arrangement should be able to obtain external professional, including actuarial, advice, at the expense of the firm, if the with-profits committee or advisory arrangement considers the advice to be necessary to perform its role effectively. In a proprietary firm the with-profits committee or advisory arrangement should
COBS 20.5.7GRP
(1) The FCA expects the governing body of the firm to decide whether a member of the with-profits committee or a person (other than a non-executive director) carrying out the advisory arrangement is independent. The FCA expects a firm'sgoverning body to adopt the following approach and have regard to the following factors when making this assessment:(a) the governing body should determine whether the person is independent in character and judgment and whether there are relationships
COBS 20.5.8GRP
In complying with the rule on systems and controls in relation to compliance, financial crime and money laundering (SYSC 3.2.6 R), a firm should maintain governance arrangements designed to ensure that it complies with, maintains and records, any applicable PPFM. These arrangements should:(1) be appropriate to the scale, nature and complexity of the firm'swith-profits business; and(2) include the approval of the firm'sPPFM by its governing body.
COBS 4.2.1RRP
(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
COBS 4.2.2GRP
(1) 1The fair, clear and not misleading rule applies in a way that is appropriate and proportionate taking into account the means of communication,6 the information the communication is intended to convey and the nature of the client and of its business, if any6. So a communication addressed to a professional client or an eligible counterparty6 may not need to include the same information, or be presented in the same way, as a communication addressed to a retail client.(2) COBS
COBS 4.2.3GRP
Part 7 (Offences relating to Financial Services) of the Financial Services Act 2012 creates criminal offences relating to certain misleading statements and practices.
COBS 4.2.4GRP
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
COBS 4.2.5GRP
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
COBS 4.2.6RRP
1If, in relation to a particular communication or financial promotion, a firm takes reasonable steps to ensure it complies with the fair, clear and not misleading rule, a contravention of that rule does not give rise to a right of action under section 138D of the Act.
COBS 15.5.1RRP
In this chapter: (1) references to a consumer include the trustees of an occupational pension scheme and the trustees or operator of a personal pension scheme or stakeholder pension scheme; and(2) any contract with such persons is to be treated as a non-distance contract.
COBS 15.5.2RRP
This chapter applies as modified to the extent necessary for it to be compatible with any enactment.
COBS 15.5.3GRP
For example:(1) the Child Trust Fund Regulations contain provisions relevant to cancellation rights; in particular they provide that any uninvested sums held in connection with a CTF should be held in a designated bank account; and the effect of conditions 4(a) and (b) in regulation 5 of the Child Trust Fund Regulations (applicable to non-HMRC allocated CTF) is that a CTF opened by way of distance contract has a cancellable management agreement in all cases and the CTF cannot
COBS 15.5.4GRP
When a consumer cancels a distance contract under this chapter, his notice may also operate to cancel any attached contract which is also a distance financial services contract unless the consumer gives notice that cancellation of the main contract is not to operate to cancel the attached contract (see regulation 12 of the Distance Marketing Regulations). Where relevant, this should be disclosed to the consumer along with other information on cancellation.
COBS 15.5.5GRP
This chapter does not act to cancel distance contracts entered into by an appointed representative or where applicable, by a tied agent,1 as principal such as a distance contract to provide advisory services, but the Distance Marketing Regulations (regulations 9 to 13, see regulation 4(3)) may have this effect.
COBS 15.5.6GRP
Where a life policy or unit bought on opening or transferring an ISA is cancellable, the right to cancel, or substitute right to withdraw, applies to the entire arrangement. For example, a maxi-ISA comprising a life policy in the stocks and shares component and a cash component would be cancellable as a whole with a cancellation period of 30 calendar days. However, a firm is free to give the consumer the option of cancelling individual components separately with the same cancellation
COBS 13.3.1RRP
A key features document must:(1) include enough information about the nature and complexity of the product, how it works, any limitations or minimum standards that apply and the material benefits and risks of buying or investing for a retail client to be able to make an informed decision about whether to proceed; 7(2) explain:(a) the arrangements for handling complaints about the product;(b) that compensation might be available from the FSCS if the firm cannot meet its liabilities
COBS 13.3.1AGRP
6When preparing a key features document for pension annuity and drawdown pension options firms should consider the information requirements for firms communicating with clients about their pension decumulation product options in COBS 19.4.12R and COBS 19.4.14R.
COBS 13.3.2RRP

Table

A key features document for a non-PRIIP packaged product8 must:

(1)

Include the title: ‘key features of the [name of product]’;

(2)

describe the product in the order of the following headings, and by giving the following information under those headings:

Heading

Information to be given

‘Its aims’

A brief description of the product’s aims

‘Your commitment’ or ‘Your investment’

What a retail client is committing to or investing in and any consequences of failing to maintain the commitment or investment

‘Risks’

The material risks associated with the product, including a description of the factors that may have an adverse effect on performance or are material to the decision to invest

‘Questions and Answers’

(in the form of questions and answers) the principle terms of the product, what it will do for a retail client and any other information necessary to enable a retail client to make an informed decision.

5[Note: in respect of ‘Risks’, article 185(4) of the Solvency II Directive]
COBS 13.3.3RRP
[deleted]83
COBS 13.3.4RRP
[deleted]84
COBS 13.3.5GRP
[deleted]84
COBS 3.6.1RRP
(1) An eligible counterparty is a client that is either a per se eligible counterparty or an elective eligible counterparty.(2) A1client can only be an eligible counterparty in relation to eligible counterparty business (PRIN 1 Annex 1 R is an exception to this).1 [Note: article 30(1)5 of MiFID]
COBS 3.6.2RRP
Each of the following is a per se eligible counterparty (including an entity that is not from the UK7 that is equivalent to any of the following) unless and to the extent it is given a different categorisation under this chapter:3(1) an investment firm;(2) a credit institution;(3) an insurance company;(4) a collective investment scheme authorised under the UK provisions which implemented the7UCITS Directive or its management company;(5) a pension fund or its management company;(6)
COBS 3.6.3GRP
For the purpose of COBS 3.6.2 R (6), a financial institution includes regulated institutions in the securities, banking and insurance sectors.
COBS 3.6.4RRP
A firm may treat a client as an elective eligible counterparty in relation to business other than MiFID or equivalent third country business5 if:(1) the client is an undertaking and:(a) is a per se professional client (except for a client that is only a per se professional client because it is an institutional investor under COBS 3.5.2 R (5)) and5: 1(i) is a body corporate (including a limited liability partnership) which has (or any of whose holding companies or subsidiaries
COBS 3.6.5GRP
The categories of elective eligible counterparties include an equivalent undertaking that is not from an the United Kingdom7 provided the above conditions and requirements are satisfied.
COBS 3.6.6RRP
A firm may obtain a prospective counterparty's confirmation that it agrees to be treated as an eligible counterparty either in the form of a general agreement or in respect of each individual transaction. [Note: second paragraph of article 30(3)5 of MiFID]
COBS 3.6.7RRP
[deleted]7
COBS 4.8.1RRP
This section applies to a firm in relation to the communication of 3a financial promotion that is not in writing, but it does not apply:(1) to the extent that the financial promotion is an excluded communication;(2) if the financial promotion is image advertising;(3) if the financial promotion is a non-retail communication;1(4) [deleted]22(5) to the extent that the financial promotion relates to a pure protection contract that is a long-term care insurance contract.1
COBS 4.8.2RRP
A firm must not make a cold call unless:(1) the recipient has an established existing client relationship with the firm and the relationship is such that the recipient envisages receiving cold calls; or(2) the cold call relates to a generally marketable packaged product which is not:(a) a higher volatility fund; or(b) a life policy with a link (including a potential link) to a higher volatility fund; or(3) the cold call relates to a controlled activity to be carried on by an authorised
COBS 4.8.3RRP
A firm must not communicate a solicited or unsolicited financial promotion that is not in writing, to a client3 outside the firm's premises, unless the personcommunicating it:(1) only does so at an appropriate time of the day;(2) identifies himself and the firm he represents at the outset and makes clear the purpose of the communication;(3) clarifies if the client would like to continue with or terminate the communication, and terminates the communication at any time that the
COBS 15.3.1RRP
If a consumer exercises his right to cancel he must, before the expiry of the relevant deadline, notify this following the practical instructions given to him. The deadline shall be deemed to have been observed if the notification, if in a durable medium available and accessible to the recipient, is dispatched before the deadline expires. [Note: article 6 (6) of the Distance Marketing Directive]
COBS 15.3.2RRP
A consumer need not give any reason for exercising his right to cancel. [Note: article 6(1) of the Distance Marketing Directive]
COBS 15.3.3GRP
The firm should accept any indication that the consumer wishes to cancel as long as it satisfies the conditions for notification. In the event of any dispute, unless there is clear written evidence to the contrary, the firm should treat the date cited by the consumer as the date when the notification was dispatched.
COBS 15.3.4RRP
The firm must make adequate records concerning the exercise of a right to cancel or withdraw and retain them:(1) indefinitely in relation to a pension transfer2, pension opt-out or FSAVC;(2) for at least five years in relation to a life policy, pension contract, personal pension scheme,1stakeholder pension scheme or lifetime ISA1; and(3) for at least three years in any other case.
COBS 10.5.1GRP
A service should be considered to be provided at the initiative of a client (see COBS 10.4.1 R (1)(a)1) unless the client demands it in response to a personalised communication from or on behalf of the firm to that particular client which contains an invitation or is intended to influence the client in respect of a specific financial instrument or specific transaction.2
COBS 10.5.2GRP
A service can be considered to be provided at the initiative of a client notwithstanding that the client demands it on the basis of any communication containing a promotion or offer of investments2 made by any means that by its very nature is general and addressed to the public or a larger group or category of clients.2
COBS 10.5.3GRP
(1) Communications to the world at large, such as those in newspapers or on billboards, are likely to be by their very nature general and therefore not personalised communications.(2) Communications addressed to a client (such as, for example, an email,2 telephone call or2 letter), may or may not be personalised depending on the content.(3) A communication is not personalised solely because it contains the name and address of the client or because a mailing list has been filtered.(4)
COBS 10.5.5GRP
The circumstances in which valuation systems will be independent of the issuer (see COBS 10.4.1 R (3)(b)) include where they are overseen by a depositary that is regulated as a provider of depositary services in a the United Kingdom3. 2
COBS 10.1.1RRP
[deleted]31
COBS 10.1.2RRP
234(1) This chapter applies to a firm which:65(a) 6arranges or deals in relation to a: (i) 6non-readily realisable security;(ii) 6speculative illiquid security;(iii) 6derivative; or (iv) 6warrant,6with or for a retail client, other than in the course of MiFID or equivalent third country business; or(b) 6facilitates a retail client becoming a lender under a P2P agreement, 6and the firm is aware, or ought reasonably to be aware, that the application or order is in response to a
COBS 10.1.3RRP
[deleted]3
COBS 10.1.4GRP
A firm that is carrying on a regulated activity on a non-advised basis, whether or not the rules in this chapter apply to its activities, should also consider whether other rules in COBS apply.3
COBS 12.4.1AUKRP
4[article 20 of the Market Abuse Regulation][Note: This section applies to a person that prepares or disseminates investment recommendations.]
COBS 12.4.4AUKRP
4[article 20(1) of the Market Abuse Regulation]
COBS 12.4.8GRP
The disclosures required under article 20(3) of the Market Abuse Regulation2 may, if the person2 so chooses, be made by graphical means (for example by use of a line graph).2
COBS 12.4.11GRP
A person may choose to disclose significant shareholdings above a lower threshold than is required by article 20(3) of the Market Abuse Regulation.22
COBS 12.4.14GRP
Where article 20(3) of the Market Abuse Regulation requires a disclosure of the proportions of all investment recommendations published that are “buy”, “hold”, “sell” or equivalent terms, the FCA considers it important for these equivalent terms to be consistent and meaningful to the recipients in terms of the course of actions being recommended, particularly for non-equity material.22
COBS 20.1.1RRP
1This chapter applies to a firm carrying on with-profits business, except to the extent modified in the following rules.
COBS 20.1.2RRP
(1) The section on the process for reattribution (COBS 20.2.42 R to COBS 20.2.52 G):(a) applies to a firm that is proposing to make a reattribution of its inherited estate;(b) but not if, and to the extent that, it would require the firm to breach, or would prevent the firm from complying with, an order made by a court of competent jurisdiction.(2) If a firm proposes to seek an order from a court of competent jurisdiction that would allow or require it to act in a way that is
COBS 20.1.3RRP
[deleted]6
COBS 20.1.4RRP
The following do not apply to a non-directive friendly society:(1) COBS 20.3 (Principles and Practices of Financial Management);3(2) COBS 20.4 (Communications with with-profits policyholders); and3(3) COBS 20.5 (With-profits governance).3
COBS 20.1.5RRP
This chapter does not apply to with-profits business that consists of effecting or carrying out Holloway sickness policies.
COBS 2.5.1RRP
(1) 1A firm must not enter into an agreement with a client under which a charge is, or may become, payable for an optional additional product unless the client has actively elected to obtain that specific product. (2) A firm must not impose a charge on a client for an optional additional product under an agreement entered into on or after 1 April 2016 unless the client has actively elected to obtain that specific product before becoming bound to pay the charge.(3) A firm must
COBS 2.5.2GRP
An example of an omission by a client which is not to be regarded as an active election is the failure by the client to change a default option such as a pre-ticked box on a website.
COBS 2.5.3GRP
Firms are reminded that a similar prohibition on opt-out selling of add-on products is imposed by The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 in relation to optional additional agreements where the main sale is not a financial service or product.
COBS 2.5.4GRP
Firms are reminded that they must ensure that their appointed representatives comply with this section COBS 2.5.
COBS 3.1.2GRP
This chapter relates to parts of the Handbook whose application depends on whether a person is a client, a retail client, a professional client or an eligible counterparty. However, it does not apply to the extent that another part of the Handbook provides for a different approach to client categorisation. For example, a separate approach to client categorisation is set out in the definition of a retail client for a firm that gives basic advice2.
COBS 3.1.3RRP
The sections in this chapter on general notifications (COBS 3.3) and policies, procedures and records (COBS 3.8) do not apply in relation to a firm that is neither:(1) conducting designated investment business; nor(2) in the case of MiFID or equivalent third country business providing an ancillary service that does not constitute designated investment business.
COBS 3.1.4RRP
If a firm conducts business for a client involving both:(1) MiFID or equivalent third country business; and(2) other regulated activities subject to this chapter;it must categorise that client for such business in accordance with the provisions in this chapter that apply to MiFID or equivalent third country business, including those provisions applied to the equivalent business of a third country investment firm4 as a result of COBS 3.1.2AR3.
COBS 3.1.5GRP
(1) For example, the requirement concerning mixed business will apply if a MiFID investment firm or third country investment firm3 advises a client on whether to invest in a scheme or a life policy. This is because the former is within the scope of MiFID and the latter is not. In such a case, the MiFIDclient categorisation requirements prevail.(2) The requirement does not apply where the MiFID or equivalent third country business is provided separately from the other regulated
COBS 13.4.1RRP
1 A key features illustration;1158(1) must include appropriate charges information;11(2) must include information about any interest that will be paid to clients on money held within a personal pension scheme bank account; and1166(3) if it is prepared for a non-PRIIP packaged product which is not a financial instrument:1166(a) must include a standardised deterministic projection; 11(b) the projection and charges information must be consistent with each other so that:11(i) the
COBS 13.4.2RRP
When the rules in this chapter require a key features illustration to be prepared, it must not take the form of a generic key features illustration:33(1) unless 3there are reasonable grounds for believing that it3 will be sufficient to enable a retail client to make an informed decision about whether to invest; or3(2) if it is part of a3direct offer financial promotion which contains a personal recommendation; or33(3) if a personal pension scheme or a stakeholder pension scheme
COBS 13.4.3GRP
A generic key features illustration3is unlikely to be sufficient to enable a retail client to make an informed decision about whether to invest if the premium or investment returns on the product will be materially affected by the personal characteristics of the investor. 3
COBS 13.4.4RRP
There is no requirement under COBS 13.4.1 R5 to include a projection in a key features illustration:(1) for a single premiumlife policy bought as a pure investment product, a product with benefits that do not depend on future investment returns or any other product if it is reasonable to believe that a retail client will not need one to be able to make an informed decision about whether to invest; or(2) if the product is a life policy that will be held in a CTF or sold with basic
COBS 13.4.5GRP
Although there may be no obligation to include a projection in a key features illustration, where a firm chooses to include one, the projection should:9(1) 9Comply with the requirements in this section unless the projection relates to an investment that is a financial instrument. (2) 9Where the projection relates to a financial instrument, the firm should comply with either: (a) 9the requirements in article 44(6) of the MiFID Org Regulation (see COBS 4.5A.14UK10) where the firm
COBS 13.5.1RRP
1A firm that communicates a projection for an in-force packaged product which is not a financial instrument:(1) must include a standardised deterministic projection; (2) may also include a stochastic projection2 except that the most prominent projection must be a standardised deterministic projection; and2must follow the projectionrules in COBS 13 Annex 2.
COBS 13.5.2RRP
222(1) 5A firm that communicates a projection for a packaged product which falls within (2) must ensure that the projection is either a standardised deterministic projection or a stochastic projection in accordance with COBS 13 Annex 2.(2) This rule applies to a packaged product which is:(a) not a financial instrument or an in-force packaged product; and(b) either: (i) a non-PRIIPpackaged product for which a key features illustration is not required to be provided; or(ii) a PRIIP
COBS 13.5.3RRP
A firm that communicates a projection of benefits for a packaged product which is not a financial instrument, as part of a combined projection where other benefits being projected include those for a financial instrument or structured deposit, is not required to comply with the projection rules in COBS 13.4, COBS 13.5 and COBS 13 Annex 2 to the extent that the combined projection4 complies with the future performance requirements in either:4(1) 4article 44(6) of the MiFID Org
COBS 13.5.4GRP
The general requirement that communications be fair, clear and not misleading will nevertheless mean that a firm that elects to comply with the future performance rule in COBS 4.6.7 R, or, if applicable, the requirement in article 44(6) of the MiFID Org Regulation (see COBS 4.5A.14UK6), will need to explain how the combined projection differs from other information that has been or could be provided to the client, including a projection provided under the projectionrules in COBS
COBS 19.2.1GRP
A financial promotion for1 a 1FSAVC should contain a prominent warning that, as an alternative1 an AVC arrangement 1exists, and that details can be obtained from the scheme administrator (if that is the case).1
COBS 19.2.2RRP
When a firm prepares a suitability report it must:(1) (in the case of a personal pension scheme), explain why it considers the personal pension scheme to be at least as suitable as a stakeholder pension scheme; (2) (in the case of a personal pension scheme, stakeholder pension scheme or2FSAVC) explain why it considers the personal pension scheme, stakeholder pension scheme or2FSAVC to be at least as suitable as any facility to make additional contributions to an occupational pension
COBS 19.2.3RRP
When a firm promotes a personal pension scheme, including a group personal pension scheme, to a group of employees it must:(1) be satisfied on reasonable grounds that the scheme is likely to be at least as suitable for the majority of the employees as a stakeholder pension scheme; and(2) record why it thinks the promotion is justified.
COBS 19.2.4GRP
4A firm should take into account the existence of any attachment (or earmarking) orders in respect of a client’spersonal pension scheme or stakeholder pension scheme.
COBS 19.2.5GRP
(1) 4An operator should ensure that it is aware of, and acts fully in accordance with, any attachment or earmarking orders made in respect of any members of that scheme by a court.(2) In particular, an operator should be mindful of its obligations under an attachment order to give notices to other parties, including transferee operators and relevant former spouses, where relevant events occur, such as transfers and significant reductions in benefits.(3) A firm, when advising a
COBS 15.2.1RRP

A consumer has a right to cancel any of the following contracts with a firm:

Cancellable contract

Cancellation period

Supplementary provisions

Life and pensions:

• 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 transfer8

• a contract to vary an existing personal pension scheme or stakeholder pension scheme by exercising, for the first time, an option to make income withdrawals6

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 )

6Lifetime ISAs (advised but not at a distance):

6• a non-distance contract to open or transfer a lifetime ISA

30 calendar days

These rights arise only following a personal recommendation of the contract (by the firm or any other person).

Exemptions may apply (see COBS 15 Annex 1)

Cash deposit ISAs:

• 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:6

• 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 (other than a lifetime ISA)6

• 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:6

• accepting deposits

• designated investment business

• issuing electronic money3

14 calendar days

Exemptions may apply (see COBS 15 Annex 1 )

[Note: article186 of the Solvency II Directive and5 article 6(1) of the Distance Marketing Directive]

5
COBS 15.2.2GRP
(1) If the same transaction attracts more than one right to cancel, the firm should apply the longest cancellation period applicable.(2) A firm may provide longer or additional cancellation rights voluntarily, but if it does these should be on terms at least as favourable to the consumer as those in this chapter, unless the differences are clearly explained.(3) If the right to cancel applies to a wrapper or pension wrapper and underlying investments, the firm may give the consumer
COBS 15.2.3RRP
The cancellation period begins:(1) either from the day of the conclusion of the contract, except in respect of contracts relating to life policies where the time limit will begin from the time when the consumer is informed that the contract has been concluded; or(2) from the day on which the consumer receives the contractual terms and conditions and any other pre-contractual information required under this sourcebook or the PRIIPs Regulation7, if that is later than the date referred
COBS 15.2.4GRP
If a firm does not give a consumer the required information about the right to cancel and other matters, the contract remains cancellable and the consumer will not be liable for any shortfall.
COBS 15.2.5RRP
(1) The firm must disclose to the consumer:(a) in good time before or, if that is not possible, immediately after the consumer is bound by a contract that attracts a right to cancel or withdraw; and(b) in a durable medium;the existence of the right to cancel or withdraw, its duration and the conditions for exercising it including information on the amount which the consumer may be required to pay, the consequences of not exercising it and practical instructions for exercising
COBS 20.3.1RRP
(1) A firm must:(a) establish and maintain the PPFM according to which its with-profits business is conducted (or, if appropriate, separate PPFM for each with-profits fund); and(b) retain a record of each version of its PPFM for five years.(2) A firm'swith-profits principles must:(a) be enduring statements of the standards it adopts in managing with-profits funds; and(b) describe the business model it uses to meet its duties to with-profits policyholders and to respond to longer-term
COBS 20.3.4RRP
A firm'sPPFM must cover the issues set out in the table in COBS 20.3.6 R.
COBS 20.3.5RRP
A firm'sPPFM must cover any matter that has, or it is reasonably foreseeable may have, a significant impact on the firm's management of with-profits funds, including but not limited to:(1) any requirements or constraints that apply as a result of previous dealings, including previous business transfer schemes;3(2) the nature and extent of any shareholder or other3 commitment to support the with-profits fund; and3(3) the precise terms and conditions of support asset arrangements,
COBS 20.3.6RRP

Table: Issues to be covered in PPFM

Subject

Issues

(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;

(ii)

how the current methods, including any relevant historical assumptions used and any systems maintained to deliver results of particular methods, are documented; and

(iii)

the procedures for changing the current method or any assumptions or parameters relevant to a particular method.

(b)

Approach to setting bonus rates.

(c)

Approach to smoothing maturity payments and surrender payments, including:

(i)

the smoothing policy applied to each type of with-profits policy;

(ii)

the limits (if any) applied to the total cost of, or excess from, smoothing; and

(iii)

any limits applied to any changes in the level of maturity payments between one period to another.

(2)

Investment strategy

Significant aspects of the firm's investment strategy for its with-profits business or, if different, any with-profits fund, including:

(a)

the degree of matching to be maintained between assets relevant to with-profits business and liabilities to with-profits policyholders and other creditors;

(b)

the firm's approach to assets of different credit or liquidity quality and different volatility of market values;

(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

(d)

the firm's controls on using new asset or liability instruments and the nature of any approval required before new instruments are used.

(3)

Business risk

The exposure of the with-profits business to business risks (new and existing), including the firm's:

(a)

procedures for deciding if the with-profits business may undertake a particular business risk;

(b)

arrangements for reviewing and setting a limit on the scale of such risks; and

(c)

procedures for reflecting the profits or losses of such business risks in the amounts payable under with-profits policies.

(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.

(5)

Management of inherited estate

Management of any inherited estate and the uses to which the firm may put that inherited estate.

(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.

(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.
COBS 20.3.7GRP
The table in COBS 20.3.8 G sets out guidance on how various information relevant to some of the issues covered in a firm'sPPFM (COBS 20.3.6 R) might be split between with-profits principles and with-profits practices. This is an example of the matters a firm should address in its with-profits principles and with-profits practices and is not exhaustive. A firm should consider carefully the scope and content of its PPFM as appropriate.
COBS 20.3.8GRP

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:

  • any distinctions made in recognising the investment return from a subset of the total assets of a with-profits fund;
  • whether expenses are apportioned between all the policies in a with-profits fund or apportioned in some other way;
  • the relationship between the liability to tax attributed to a with-profits fund and the tax that the firm imputes to determine the amount payable;
  • impact on the amount payable of any attributed liability to tax of a with-profits fund as a result of the firm making a transfer to shareholders; and
  • how any other items are brought into account.

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

Smoothing

(d) Statement as to whether smoothing is intended to be neutral over time.

Smoothing

(q) Any differences in approach for:

(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.
COBS 22.3.1RRP
(1) 1The restrictions in this section apply in relation to the following investments:(a) a contingent convertible instrument; or(b) a security issued by a CoCo fund; or(c) a beneficial interest in either of (a) or (b).(2) A firm must not:(a) sell an investment to a retail client in the United Kingdom2; or(b) communicate or approve an invitation or inducement to participate in, acquire or underwrite an investment where that invitation or inducement is addressed to or disseminated
COBS 22.3.2RRP

1Each of the exemptions listed below applies only if the retail client is of the type described for the exemption and provided any additional conditions for the exemption are met.

Title

Type of retail client

Additional conditions

Certified high net worth investor4

(a) An individual who meets the requirements set out in COBS 4.12B.38R4; or

(b) a person (or persons) legally empowered to make investment decisions on behalf of an individual who meets the earnings or net asset requirements in (a) above.2

2

The firm must consider that the investment is likely to be suitable for that individual, based on a preliminary assessment of that individual’s profile and objectives (see COBS 4.12B.9G(2)4.

Certified sophisticated investor4

(a) An individual who meets the requirements set out in COBS 4.12B.39R4; or

(b) an individual who meets the requirements for (a) above and who is legally empowered (solely or jointly with others) to make investment decisions on behalf of another person who is the firm’s client.22

Not applicable.

Self-certified sophisticated investor4

(a) An individual who meets the requirements set out in COBS 4.12B.40R4; or

(b) an individual who meets the requirements for (a) above and who is legally empowered (solely or jointly with others) to make investment decisions on behalf of another person who is the firm’s client.22

The firm must consider that the investment is likely to be suitable for that individual, based on a preliminary assessment of that individual’s profile and objectives (see COBS 4.12B.9G(2)4).

Solicited advice

Any retail client.

The restrictions do not apply provided all of the following requirements are met:

(a) there is no invitation or inducement to participate in, acquire or underwrite the investment other than a personal recommendation on the investment;

(b) the personal recommendation is made following a specific request by that client for advice on the investment; and

(c) the client has not previously received any other communication (whether or not a financial promotion) from the firm or from a person connected to the firm which is intended to influence the client in relation to the investment.

(See Note 1)

MiFID or equivalent third country business other than financial promotions

Any retail client.

COBS 22.3.1R(2)(a) does not apply to MiFID or equivalent third country business (see COBS 9.3.5G).

Prospectus

Any retail client.

The restrictions do not apply to the distribution of a prospectus required under the Prospectus Regulation3.

Issuers

Any retail client

To the extent that the firm is acting as issuer of a contingent convertible instrument, the restrictions only apply to the original issuance of the contingent convertible instrument and not to subsequent trading in the secondary market.

Indirect investment

Any retail client

The restrictions do not apply in relation to a beneficial interest in a contingent convertible instrument acquired through participation in a regulated collective investment scheme, investment in a non-mainstream pooled investment (provided it is not a CoCo fund), or membership of an occupational pension scheme.

Note 1

A person is connected with a firm if it acts as an introducer or appointed representative for that firm or if it is any other person, regardless of authorisation status, who has a relevant business relationship with the firm.

Note 2

See COBS 2.4 for rules and guidance on agent as client and reliance on others.

COBS 22.3.3RRP
(1) For the purposes of any assessments or certifications required by the exemptions in COBS 22.3.2R, any references in COBS 4.12B4 provisions to non-mass market investments4 must be read as though they are references to contingent convertible instruments or CoCo funds, as relevant.(2) [deleted]4(3) The firm must give the retail client a written copy of any statements that individual has been asked to sign as part of certification as a high net worth, sophisticated or self-certified
COBS 22.3.4GRP
A firm wishing to certify a retail client as a sophisticated investor for the purposes of this section should note that, in the FCA’s view, it is likely that the only retail clients with the requisite sophistication in relation to contingent convertible instruments or CoCo funds are those with significant experience with investment in multiple types of complex financial instruments and who have sufficient understanding of how credit institutions are run, including risks to the
COBS 22.3.5RRP
A firm which carries on an activity which is subject to this section must comply with the following record-keeping requirements:(1) the person allocated the compliance oversight function in the firm must make a record at or near the time of the activity certifying it complies with the restrictions set out in this section;(2) the making of the record required in (1) may be delegated to one or more employees of the firm who report to, and are supervised by, the person allocated
COBS 22.3.6GRP
To the extent the requirements in COBS 22.3.5R apply to the communication or approval of any invitation or inducement, such requirements are in addition to those set out in COBS 4.11.