Related provisions for COBS 11.4.4
1 - 20 of 117 items.
2(1) With-profits business, by virtue of its nature and the extent of discretion applied by firms in its operation, involves numerous potential conflicts of interest that might give rise to the unfair treatment of policyholders. Potential conflicts of interest may arise between shareholders and with-profits policyholders, between with-profits policyholders and non-profit policyholders within the same fund, between with-profits policyholders and the members of mutually-owned firms,
(1) 2Notwithstanding that there may not be a rule in the remainder of this section addressing a particular aspect of a firm's operating practices, firms will need to ensure that they take reasonable care to ensure that all aspects of their operating practice comply with COBS 20.2.1A R.(2) For the avoidance of doubt COBS 20.2.1A R does not exhaust or restrict the scope of Principle 6. Firms will in any event need to ensure that their operating practices are consistent with Principle
(1) Unless a firm cannot reasonably compare a maturity payment with a calculated asset share, it must:(a) set a target range for the maturity payments that it will make on:(i) all of its with-profits policies; or(ii) each group of its with-profits policies;(b) ensure that each target range:(i) is expressed as a percentage of unsmoothed asset share; and(ii) includes 100% of unsmoothed asset share; and(c) manage its with-profits business, and the business of each with-profit fund,
Notwithstanding that a firm must aim to make maturity payments that fall within the relevant target range, a firm may make a maturity payment that falls outside the target range if it has a good reason to believe that at least 90% of maturity payments on with-profits policies in that group have fallen, or will fall, within the relevant target range.
If it is not fair or reasonable to calculate or assess a maturity payment using the prescribed asset share methodology, a firm may use another methodology to set bonus rates, if that methodology properly reflects its representations to with-profits policyholders and it applies that methodology consistently.
If a firm has approved a plan to make deductions from asset share, it must ensure that its planned deductions do not change unless justified by changes in the business or economic environment, or changes in the nature of the firm's liabilities as a result of policyholders exercising options in their policies.
A firm may use its own methodology to calculate surrender payments, but it should have good reason to believe that its methodology produces a result which, in aggregate across all similar policies, is not less than the result of the prescribed asset share methodology. A firm might, for example, test the surrender payments on a suitable range of specimen with-profits policies.
Amounts that might be deducted include:(1) the firm's unrecovered costs, including any financing costs incurred in effecting or carrying out the surrendered with-profits policy to the date of surrender, including the costs that might have been recovered if the policy had remained in force;(2) costs that would fall on the with-profits fund, if the surrender value is calculated by reference to an assumed market value of assets which exceeds the true market value of those assets;(3)
A firm must not, in so far as is reasonably practicable,2 make a market value reduction to the face value of the units of an accumulating with-profits policy unless:(1) the market value of the with-profits assets in the relevant with-profits fund is, or is expected to be, less than the assumed value of the assets on which the face value of the units of the policy has been based; and222(2) the market value reduction is no greater than is necessary to reflect the impact of the difference
2If a firm is able to satisfy COBS 20.2.16R (1), then the volume of surrenders, transfers, or other exits from the with-profits fund that there has been, or is expected to be, is a factor that a firm may take into account when it is considering whether to make a market value reduction, and if so, its amount, subject to the limit in COBS 20.2.16R (2).
5References to distributions in COBS 20 includes distributions of distributable profits arising, namely any permanent addition to policy benefits made at the firm's discretion based on the investment or other experience in the fund or more generally. Distributions include those relating to expected payments for which allowance has been made in the technical provisions or to a firm's other liabilities arising from its regulatory duty to treat customers fairly, and not just distributions
5Examples of distributions include any payment of a cash bonus (including a final bonus on exit or a reduction in premium), or a declaration of a reversionary bonus in the form of a permanent addition to the benefits guaranteed to be payable at death or on maturity. In COBS 20.2.21 R and COBS 20.2.22 E (distributions from excess surplus) distributions also include any other amounts that are added to asset shares or to any other measure that is used to determine pay-outs under
(1) 2Where a firm adjusts the amounts distributed to policyholders, either by market value reduction or otherwise, in a way that would result in a distribution to policyholders of less than the required percentage, taking both the relevant distributions and the adjustment into account, then the firm must apply a proportionate adjustment to amounts distributed to shareholders so that the distribution to policyholders will not be less than the required percentage.(2) The adjustments
2An example of the application of COBS 20.2.17A R, without limitation to its scope generally, is where a firm reduces, for any reason, the amounts of a bonus or of bonus units added to policies in force. The firm should treat this as effectively a ‘negative distribution’, calculated by making the same assumptions regarding discount rates and other relevant factors as would be used for positive bonus additions. The amount so calculated should then be taken into account in ensuring
7A firm must not make a distribution from a with-profits fund, unless:55(1) if it is not a Solvency II firm, the whole of the cost of that distribution can be met without eliminating the regulatory surplus in that with-profits fund; and5(2) if it is a Solvency II firm:5(a) the whole of the cost of that distribution can be met without eliminating the with-profits fund surplus in that with-profits fund; and(b) following any distribution that is made to meet a liability for which
A firm which is not a Solvency II firm5 must not make a distribution from a with-profits fund to any person who is not a with-profits policyholder, unless the whole of the cost of that distribution (including the cost of any obligations that will or may arise from the decision to make a distribution) can be met from the excess, if any,5 of the assets over the liabilities5 in that with-profits fund.55
5If a firm which is a Solvency II firm proposes to make a distribution from a with-profits fund to any person who is not a with-profits policyholder, where:(1) the distribution to with-profits policyholders is smaller than the ‘pre-notification to policyholder minimum’ calculated in accordance with COBS 20.2.19BR (1) then the firm must:(a) provide the FCA with written details of the proposed distribution at least two months prior to the proposed distribution, together with copies
(1) 5The ‘pre-notification to policyholder minimum’ referred to in COBS 20.2.19A R is as follows:wherea is the total amount available for with-profits distribution in the with-profits fund in question at the time of the most recent previous distribution;b is the amount of the most recent previous distribution to with-profits policyholders; andc is the total amount available for with-profits distribution in relation to the proposed distribution.(2) The ‘after the event notification
(1) 5If the circumstances in COBS 20.2.19AR (1) or (2) arise, the firm should also consider whether any reduction(s) in the proposed distribution and any previous distributions to with-profits policyholders over a period of at least the last five years are consistent with treating with-profits policyholders fairly and any other obligations of the firm under COBS 20.(2) When calculating the amounts distributed in COBS 20.2.19A R and COBS 20.2.19B R:(a) any amount allocated to with-profits
If, on a distribution, a firm incurs a tax liability on a transfer to shareholders, it must not attribute that tax liability to a with-profits fund, unless:(1) the firm can show that attributing the tax liability to that with-profits fund is consistent with its established practice;(2) that established practice is explained in the firm's PPFM; and(3) that liability is not charged to asset shares.
At least once a year (or, in the case of a non-directive friendly society, at least once in every three years) and whenever a firm is seeking to make a reattribution of its inherited estate,2 a firm'sgoverning body must determine whether the firm'swith-profits fund, or any of the firm'swith-profits fund, has an excess surplus.
(1) If a with-profits fund has an excess surplus, and to retain that surplus would be a breach of Principle 6 (Customers' interests), the firm should make a distribution from that with-profits fund.22(2) Compliance with (1) may be relied on as tending to establish compliance with Principle 6 (Customers' interests).(3) Contravention of (1) may be relied on as tending to establish a contravention of Principle 6 (Customers' interests).
A mutual may pay compensation or redress due to a policyholder, or formerpolicyholder, from a with-profits fund, but may only pay from assets that would otherwise be attributable to asset shares if, in the reasonable opinion of the firm'sgoverning body, the compensation or redress cannot be paid from any other assets in the with-profits fund. 1
A payment or transfer of liabilities made to correct an error and which has the effect of restoring a policyholder, or former policyholder, and the with-profits fund to the position they would have been in if the error had not occurred (a “rectification payment”), is not a payment of compensation or redress for the purposes of COBS 20.2.24 R.1
Rectification payments may include, for example, a payment to a policyholder or former policyholder to correct an erroneous underpayment of policy proceeds, or a reimbursement of premiums overpaid. The effect of COBS 20.2.25B R is that a firm may make rectification payments using assets in a with-profits fund.1
A proprietary firm must not charge to a with-profits fund any amounts paid or payable to a skilled person in connection with a report under section 166 of the Act (Reports by skilled persons) if the report indicates that the firm has, or may have, materially failed to satisfy its obligations under the regulatory system1.1
A firm must not effect new contracts of insurance in an existing with-profits fund unless:22(1) the firm'sgoverning body is satisfied, so far as it reasonably can be, and can demonstrate, having regard to the analysis in (2), that the terms on which each type of contract is to be effected are likely to have no adverse effect on the interests of the with-profits policyholders whose policies are written into that fund; and2(2) the firm has:(a) carried out or obtained appropriate
(1) 2Writing new insurance business into a with-profits fund is not, of itself, automatically adverse to the interests of with-profits policyholders. For example, new insurance business which defers the emergence or distribution of surplus to a limited extent for a number of policyholders, or which leads to a marginal change in the equity backing ratio, may, subject to satisfying the guidance in COBS 20.2.60 G and COBS 20.2.29 G, reasonably be considered not to have an adverse
In some circumstances, it may be difficult or impossible for a firm to mitigate the risk of an2 adverse effect on its existing, or new, with-profits policyholders, unless it establishes a new bonus series or with-profits fund. Circumstances that might cause a firm to establish a new bonus series or with-profits fund include:2(1) where the firm has a high level of guarantees or options in its existing with-profits policies, which might place an excessive burden on new with-profits
2(1) When a firm prices the new insurance business that it proposes to effect in an existing with-profits fund, it should estimate the volume of new insurance business that it is likely to effect and then build in adequate margins that will allow it to recover any acquisition costs to be charged to the with-profits fund.2(2) COBS 20.2.28 R requires firms to obtain appropriate analysis and evidence and this should include at least a profitability analysis on a marginal cost ba
When a firm sets a target volume for new insurance business in an existing with-profits fund, it should pay particular attention to the risk of disadvantage to existing with-profits policyholders. Those policyholders might be disadvantaged, for example, by the need to retain additional capital to support a rapid growth in new business, when that capital might have been distributed in the ordinary course of the firm's existing business.
Unless COBS 20.2.32A R applies, a5firm carrying on with-profits business must not:5(1) make a loan to a connected person using assets in a with-profits fund; or(2) give a guarantee to, or for the benefit of, a connected person, where the guarantee will be backed using assets in a with-profits fund;unless that loan or guarantee:(3) will be on commercial terms;(4) will, in the reasonable opinion of the firm's senior management, be beneficial to the with-profits policyholders in
5Loans to a connected person using assets in a with-profits fund should be considered as investments of assets within the with-profits fund. As such, a Solvency II firm will need to ensure that: (1) such loans comply with the PRA Rulebook: Solvency II Firms: Investments having regard to COBS 20.2.35B G; and(2) where there is a conflict of interests, in the reasonable opinion of the firm's senior management, they are in the best interests of the with-profits policyholders in the
(1) If a firm, or a connected person, provides support to a with-profits fund (for example, by a contingent loan), no reliance should be placed on that support when the firm assesses the with-profits fund's financial position unless there are clear and unambiguous criteria governing any repayment obligations to the support provider.(2) The degree of reliance placed on that support should depend on the subordination of the support to the fair treatment of with-profits policyholders
Where assets from outside a with-profits fund are made available to support that fund (and there is no ambiguity in the criteria governing any repayment obligations to the support provider), a firm should manage the fund disregarding the liability to repay those assets, at least in so far as that is necessary for its policyholders to be treated fairly.
(1) 5A Solvency II firm must ensure that, in relation to any arrangements where assets outside a with-profits fund provide or may provide support to it, both the following requirements are met: (a) the precise terms and conditions on which those support asset arrangements operate and assets may become available, including whether and when they are repayable: (i) are adequately documented in the firm's records; and(ii) if the firm is required to produce a PPFM, are set out clearly
When a firm, other than a Solvency II firm,5 determines its investment strategy, and the acceptable level of risk within that strategy, it should take into account:(1) the extent of the guarantee in its with-profits policies;(2) any representation that it has made to its with-profits policyholders;(3) its established practice; and(4) the amount of capital support available.
(1) 5A Solvency II firm is required to consider its investment strategy in relation to the assets in a with-profits fund, including any strategic investments, in accordance with the PRA Rulebook: Solvency II Firms: Investments. Firms are expected, in applying the PRA Rulebook: Solvency II Firms: Investments, to take into account the particular circumstances and requirements of the liabilities in the with-profits fund to which those assets relate. For example, a Solvency II firm
A firm, other than a Solvency II firm,5 must not:2(1) use with-profits assets to finance the purchase of a strategic investment, directly or by or through a connected person; or2(2) retain an investment referred to in (1);2unless its governing body is satisfied, so far as it reasonably can be, and can demonstrate, that the purchase or retention is likely to have no adverse effect on the interests of its with-profits policyholders whose policies are written into the relevant f
(1) 2In order for a firm to comply with COBS 20.2.36 R, a firm'sgoverning body should consider:(a) the size of the investment in relation to the with-profits fund;(b) the expected rate of return on the investment;(c) the risks associated with the investment, including, but not limited to, liquidity risk, the capital needs of the acquired business or investment and the difficulty of establishing fair value (if any);(d) any costs that would result from divestment;(e) whether the
2A firm must contact the FCA as soon as is reasonably practicable to make arrangements to discuss what actions may be required to ensure the fair treatment of with-profits policyholders if, in relation to any with-profits fund it operates:(1) the firm reasonably expects, or if earlier, there has been, a sustained and substantial fall in either the volume of new non-profit insurance contracts, or in the volume of new with-profits policies (effected other than by reinsurance), or
(1) 2The aim of the discussions in COBS 20.2.41A R is to:(a) allow the FCA to comment on the adequacy of the firm's planning; and(b) seek agreement with the firm on any other appropriate actions to ensure with-profits policyholders are treated fairly.(2) If the firm is no longer effecting a material volume of new with-profits policies (other than by reinsurance) into a with-profits fund; or if it is ceding by way of reinsurance most or all of the new with-profits policies which
A firm that is seeking to make a reattribution of its inherited estate must:(1) first discuss with the FCA7 (as part of its determination under COBS 20.2.21 R):227(a) its projections for capital required to support existing business, which must include an assessment of:2(i) the firm's future risk appetite for the with-profits fund and other relevant business; and2(ii) how much of the margin for prudence can be identified as excessive and removed from the projected capital requirements;
The firm should include an independent element in the policyholder advocate selection process, which may include consulting representative groups of policyholders or using the services of a recruitment consultant. When considering an application for approval of a nominee to perform the policyholder advocate role, the FCA will have regard to the extent to which the firm has involved others in the selection process.
The precise role of the policyholder advocate in any particular case will depend on the nature of the firm and the reattribution proposed. A firm will need to discuss, with a view to agreeing,2 with the FCA the precise role of the policyholder advocate in a particular case (COBS 20.2.45 R). However, the role of the policyholder advocate should include:(1) negotiating with the firm, on behalf of the relevant with-profits policyholders, the benefits to be offered to them in exchange
A firm must:(1) notify the FCA of the terms on which it proposes to appoint a policyholder advocate (whether or not the candidate was nominated by the FCA); and(2) ensure that the terms of appointment for the policyholder advocate:(a) include a description of the role of the policyholder advocate as agreed with the FCA under COBS 20.2.44 G;2(aA) stress the independent nature of the policyholder advocate's appointment and function, and are consistent with it;2(b) define the relationship
A firm may include, within the policyholder advocate's terms of appointment, arrangements for the policyholder advocate to be indemnified in respect of certain claims that may be made against him in connection with the performance of his functions. If such indemnity is included, it should not include protection against any liability arising from acts of bad faith.
Where a firm is not otherwise required to appoint an independent expert, it must:(1) appoint a reattribution expert to undertake an objective assessment of its reattribution proposals, who must be:(a) nominated or approved by the appropriate regulator before he is appointed; and(b) free from any conflicts of interest that may, or may appear to, undermine his independence or the quality of his report;(2) ensure that the reattribution expert's terms of appointment allow him to communicate
A reattribution expert's report should comply with the applicable rules on expert evidence. The scope and content of the report should be substantially similar to that of the report required of an independent expert under SUP 18.2 (Insurance business transfers), as if (where appropriate) a reference to:(1) the 'scheme report' was a reference to the 'reattribution expert's report';(2) the 'independent expert' was a reference to the 'reattribution expert'; and(3) the 'scheme' was
A firm must ensure that every policyholder that may be affected by the proposed reattribution is sent appropriate and timely information about:(1) the reattribution process, including the role of the policyholder advocate, the independent expert or reattribution expert, as the case may be, and other individuals appointed to perform particular functions;(2) the reattribution proposals and how they affect the relevant policyholders, including an explanation of any benefits they
A firm must give relevant with-profits policyholders the option to:(1) individually accept or reject the final proposals for the reattribution; or(2) (if the legal process to be followed allows the majority of policyholders to bind the minority) vote on whether the firm should go ahead with those proposals.
(1) Reattribution and insurance business transfer costs (excluding policyholder advocate costs) should be met from shareholder funds. A firm may present alternative arrangements if it can show good reasons for doing so.(2) Shareholders should pay a reasonable proportion of the policyholder advocate's costs.(3) If a reattribution proposal is not successful, the FCA would expect the costs of the policyholder advocate to be met by the person initiating the proposal. That will usually
A firm must:(1) inform the appropriate regulator and its with-profits policyholders within 28 days; and(2) submit a run-off plan to the appropriate regulator as soon as reasonably practicable and, in any event, within three months;of first ceasing to effect new contracts of insurance in a with-profits fund.
A firm will be taken to have ceased to effect new contracts of insurance in a with-profits fund:(1) when any decision by the governing body to cease to effect new contracts of insurance takes effect; or(2) where no such decision is made, when the firm is no longer:(a) actively seeking to effect new contracts of insurance in that fund; or(b) effecting new contracts of insurance in that fund, except by increment; or2(3) if the firm:2(a) (i) is no longer effecting a material volume
When a firm tells its with-profits policyholders that it has ceased to effect new contracts of insurance in a with-profits fund, it should also explain:(1) why it has done so;(2) what changes it has made, or proposes to make, to the fund's investment strategy (if any);(3) how closure may affect with-profits policyholders (including any reasonably foreseeable effect on future bonus prospects);(4) the options available to with-profits policyholders and an indication of the potential
A firm may not be able to provide its with-profits policyholders with all of the information described above until it has prepared the run-off plan. In those circumstances, the firm should:(1) tell its with-profits policyholders that that is the case;(2) explain what is missing and give a time estimate for its supply; and(3) provide the missing information as soon as possible, and within the time estimate given.
(1) If non-profit insurance business is written in a with-profits fund, a firm should take reasonable steps to ensure that the economic value of any future profits expected to emerge on the non-profit insurance business is available for distribution during the lifetime of the with-profits business.(1A) Where a with-profits fund contains assets which may not be readily realisable, the firm should take reasonable steps to ensure that the economic value of those assets is made available
(1) 4A mutual operating a common fund may seek to undertake an exercise to identify that part of the fund to which the mutual considers it would be fair for relevant provisions in COBS 20 not to apply. (2) To give regulatory effect to the identification exercise, the FCA expects that a mutual will need to apply to the FCA to modify the relevant provisions in COBS 20 and elsewhere which are dependent on the definition of the with-profits fund. (3) A mutual will need to demonstrate
A firm must take all reasonable steps to obtain, when executing orders, the best possible result for its clients taking into account the execution factors.42[Note: The Committee of European Securities Regulators (CESR) has issued a Question and Answer paper on best execution under the first Markets in Financial Instruments Directive (MiFID I, 2004/39/EU)5. This paper also incorporates the European Commission's response to CESR's questions regarding the scope of the best execution
If a firm provides a quote to a client and that quote would meet the firm's obligations to take all reasonable steps to obtain the best possible result for its clients if the firm executed that quote at the time the quote was provided, the firm will meet those same obligations if it executes its quote after the client accepts it, provided that, taking into account the changing market conditions and the time elapsed between the offer and acceptance of the quote, the quote is not
The obligation to deliver the best possible result when executing client orders applies in relation to all types of financial instruments. However, given the differences in market structures or the structure of financial instruments, it may be difficult to identify and apply a uniform standard of and procedure for best execution that would be valid and effective for all classes of instrument. Best execution obligations should therefore be applied in a manner that takes into account
When executing a client order, a firm must take into account the following criteria for determining the relative importance of the execution factors:(1) the characteristics of the client including the categorisation of the client as retail or professional;(2) the characteristics of the client order;(3) the characteristics of financial instruments that are the subject of that order; and4(4) the characteristics of the execution venues to which that order can be directed.42(5) [deleted]4instrument
Where a firm executes an order on behalf of a retail client, the best possible result must be determined in terms of the total consideration, representing the price of the financial instrument and the costs related to execution, which must include all expenses incurred by the client which are directly related to the execution of the order, including execution venue fees, clearing and settlement fees and any other fees paid to third parties involved in the execution of the ord
For the purposes of ensuring that a firm obtains the best possible result for the client when executing a retail client order in the absence of specific client instructions, the firm should take into consideration all factors that will allow it to deliver the best possible result in terms of the total consideration, representing the price of the financial instrument and the costs related to execution. Speed, likelihood of execution and settlement, the size and nature of the order,
A firm's execution policy should determine the relative importance of each of the execution factors or establish a process by which the firm will determine the relative importance of the execution factors. The relative importance that the firm gives to those execution factors must be designed to obtain the best possible result for the execution of its client orders. Ordinarily, the FCA would expect that price will merit a high relative importance in obtaining the best possible
For the purposes of delivering best execution for a retail client where there is more than one competing venue to execute an order for a financial instrument, in order to assess and compare the results for the client that would be achieved by executing the order on each of the execution venues listed in the firm's order execution policy that is capable of executing that order, the firm's own commissions and costs for executing the order on each of the eligible execution venues
The obligation to deliver best execution for a retail client where there are competing execution venues is not intended to require a firm to compare the results that would be achieved for its client on the basis of its own execution policy and its own commissions and fees, with results that might be achieved for the same client by any other firm on the basis of a different execution policy or a different structure of commissions or fees. Nor is it intended to require a firm to
A firm would be considered to structure or charge its commissions in a way which discriminates unfairly between execution venues if it charges a different commission or spread to clients for execution on different execution venues and that difference does not reflect actual differences in the cost to the firm of executing on those venues.4
A firm must establish and implement effective arrangements for complying with the obligation to take all reasonable steps to obtain the best possible result for its clients. In particular, the firm must establish and implement an order execution policy to allow it to obtain, for its client orders, the best possible result in accordance with that obligation.42
The order execution policy must include, in respect of each class of financial instruments, information on the different execution venues where the firm executes its client orders and the factors affecting the choice of execution venue. It must at least include those execution venues that enable the firm to obtain on a consistent basis the best possible result for the execution of client orders.4
(1) When establishing its execution policy, a firm should determine the relative importance of the execution factors, or at least establish the process by which it determines the relative importance of these factors, so that it can deliver the best possible result to its clients.(2) In order to give effect to that policy, a firm should select the execution venues that enable it to obtain on a consistent basis the best possible result for the execution of client orders.(3) A firm
(1) Whenever there is a specific instruction from the client, the firm must execute the order following the specific instruction.4(2) A firm satisfies its obligation under this section to take all reasonable steps to obtain the best possible result for a client to the extent that it executes an order, or a specific aspect of an order, following specific instructions from the client relating to the order or the specific aspect of the order.4
When a firm executes an order following specific instructions from the client, it should be treated as having satisfied its best execution obligations only in respect of the part or aspect of the order to which the client instructions relate. The fact that the client has given specific instructions which cover one part or aspect of the order should not be treated as releasing the firm from its best execution obligations in respect of any other parts or aspects of the client order
A firm should not induce a client to instruct it to execute an order in a particular way, by expressly indicating or implicitly suggesting the content of the instruction to the client, when the firm ought reasonably to know that an instruction to that effect is likely to prevent it from obtaining the best possible result for that client. However, this should not prevent a firm inviting a client to choose between two or more specified trading venues, provided that those venues
(1) A firm must provide a retail client with the following details on its execution policy in good time prior to the provision of the service:(a) an account of the relative importance the firm assigns, in accordance with the execution criteria, to the execution factors, or the process by which the firm determines the relative importance of those factors;(b) a list of the execution venues on which the firm places significant reliance in meeting its obligation to take all reasonable
2A full-scope UK AIFM6must make available appropriate information on its execution policy required under article 27(3) of the AIFMD level 2 regulation (Execution of decisions to deal on behalf of the managed AIF)4 and on any material changes to that policy to the investors in4 of each AIF4 it manages.44
A firm must monitor the effectiveness of its order execution arrangements and execution policy in order to identify and, where appropriate, correct any deficiencies. In particular, it must assess, on a regular basis, whether the execution venues included in the order execution policy provide for the best possible result for the client or whether it needs to make changes to its execution arrangements. The firm must notify clients of any material changes to their order execution
(1) A firm must review annually its execution policy, as well as its order execution arrangements.(2) This review must also be carried out whenever a material change occurs that affects the firm's ability to continue to obtain the best possible result for the execution of its client orders on a consistent basis using the venues included in its execution policy.42
A firm must, when providing the service of portfolio management4,2 comply with the obligation to act in accordance with the best interests of its clients when placing orders with other entities for execution that result from decisions by the firm to deal in financial instruments on behalf of its client.42
In order to comply with the obligation to act in accordance with the best interests of its clients when it places an order with, or transmits an order to, another entity for execution, a firm must:42(1) take all reasonable steps to obtain the best possible result for its clients taking into account the execution factors. The relative importance of these factors must be determined by reference to the execution criteria and, for retail clients,2 to the requirement to determine the
The provisions applying to a firm which places orders with, or transmits orders to, other entities for execution (see COBS 11.2.30 R to COBS 11.2.33 G) will not apply when the firm which provides the service of portfolio management or collective portfolio management2 and/or service of reception and transmission of orders also executes the orders received or the decisions to deal on behalf of its client's portfolio. In those cases the requirements of this section for firms who
(1) 1This section applies to a firm which makes personal recommendations to retail clients in relation to retail investment products, pension transfers, pension conversions, pension opt-outs 1912or P2P agreements.1111(2) This section does not apply to a firm giving advice, or providing services, to an employer in connection with a group personal pension scheme or group stakeholder pension scheme.2
8PERG 8.30B (Personal recommendations) describes what is meant by a personal recommendation in the context of the definition of the regulated activity of advising on investments (except P2P agreements). That guidance is also relevant to the meaning of personal recommendation in this section in relation to a retail investment product.18 The guidance16 in PERG 8.24 to PERG 8.30B18 does not apply to the regulated activity of advising on P2P agreements. 121216161212
Except as specified in this section,19 a firm must:1115156(1) only be remunerated for the personal recommendation (and any other related services provided by the firm) by adviser charges; and(2) not solicit or accept (and ensure that none of its associates solicits or accepts) any other commissions, remuneration or benefit of any kind in connection with the firm’s business of advising16 or any other related services16, regardless of whether it intends to refund the payments or
6A firm and its associates may:(1) solicit and accept a commission, remuneration or benefit of any kind in the circumstances set out in COBS 6.1A.4 R if:(a) the personal recommendation was made on or before 30 December 2012;(b) the solicitation and acceptance of the commission, remuneration or benefit of any kind was permitted by the rules in force on 30 December 2012;(c) the contract under which the right to receive the commission, remuneration or benefit of any kind was entered
(1) 8A firm may continue to accept a commission, remuneration or benefit of any kind after 30 December 2012 if there is a clear link between the payment and an investment in a retail investment product which was made by the retail client following a personal recommendation made, or a transaction executed, on or before 30 December 2012. This is the case even if the firm makes a personal recommendation to the same retail client after 30 December 2012 to the extent that the continued
11A firm and its associates may solicit and accept a commission, remuneration or benefit of any kind from a discretionary investment manager in the circumstances in COBS 6.1A.4 R if:(1) the firm or its associates recommended the discretionary investment manager to a retail client on or before 30 December 2012;(2) the solicitation and acceptance of the commission, remuneration or benefit of any kind was permitted by the rules in force on 30 December 2012;(3) the contract under
(1) 11If a firm makes a recommendation of a discretionary investment manager to a retail client and wishes to:(a) receive remuneration for that recommendation in addition to any commission, remuneration or benefit of any kind it receives in the circumstances contemplated by COBS 6.1A.4AB R; or(b) be paid additional amounts for any actions linked to a new amount invested by the retail client through the same discretionary investment manager;it should only be paid those additional
6If a retail client chooses to become a client of a firm and that firm or its associate enters into an arrangement in COBS 6.1A.4AR (2), the firm must:(1) before the arrangement is entered into, disclose to the retail client that the transfer of the commission, remuneration or benefit of any kind will be requested by the firm or its associate;(2) throughout the period during which the firm or its associate receives the commission, remuneration or benefit of any kind, provide the
7‘Related service(s)’ for the purposes of COBS 6.1A includes:(1) arranging or executing a transaction which has been recommended to a retail client by the firm, an associate or another firm in the same group or conducting administrative tasks associated with that transaction; or(2) managing a relationship between a retail client (to whom the firm provides personal recommendations on retail investment products, pension transfers, pension conversions, pension opt-outs19 or P2P
11‘Other services’ in COBS 6.1A.6R (3) includes:(1) providing information relating to retail investment products, pension transfers, pension conversions, pension opt-outs,19P2P agreements or operators of electronic systems in relation to lending12 to the retail client, for example, general market research; or(2) passing on information from the discretionary investment manager to the retail client.
Examples of payments and benefits that should not be accepted under the requirement to be paid through adviser charges include:(1) a share of the retail investment product charges or platform service provider's charges, or5retail investment product provider’s or platform service provider's5 revenues or profits; 125(2) a commission set and payable by a retail investment product provider or an operator of an electronic system in relation to lending12 in any jurisdiction12; and(3)
If the firm or its associate is the retail investment product provider, platform service provider14 or operator of an electronic system in relation to lending12, the firm must ensure that the level of its adviser charges is at least reasonably representative of the cost of the14 services associated with making the personal recommendation (and related services).
An adviser charge is likely to be reasonably representative of the cost of the14 services associated with making the personal recommendation if:(1) the total14 expected14 costs associated with making a personal recommendation and distributing the retail investment product will:14(a) be recovered through adviser charges; and14(b) not be recovered by charges for, or profits from, other services (such as manufacturing and administering the retail investment product);14(2) the14adviser
In determining its charging structure and adviser charges a firm should have regard to its duties under the client's best interests rule. Practices which may indicate that a firm is not in compliance with this duty include:(1) varying its adviser charges inappropriately according to provider or, for substitutable and competing retail investment products, the type of retail investment product; or(2) allowing the availability or limitations of services offered by third parties
9A firm must not make a personal recommendation to a retail client in relation to a retail investment product or P2P agreement12if it knows, or ought to know, that:(1) the product’s charges,12 the platform service provider's charges or the operator of the electronic system in relation to lending’s charges 12are presented in a way that offsets or may appear to offset any adviser charges or platform charges that are payable by that retail client; or(2) the product’s charges or other
A firm is likely to be viewed as operating a charging structure that conceals the amount or purpose of its adviser charges if, for example:(1) it makes arrangements for amounts in excess of its adviser charges to be deducted from a retail client's investments from the outset, in order to be able to provide a cash refund to the retail client later; or(2) it provides other services to a retail client (for example, advising on a home finance transaction or advising on an equity release
19To meet its responsibilities under the client's best interests rule and Principle 6 (Customers’ interests):19(1) a firm should consider whether the personal recommendation or any other related service is likely to be of value to the retail client when the total charges the retail client is likely to be required to pay are taken into account;19(2) a firm that advises on conversion or transfers of pension benefits should consider whether it would be more appropriate to give a
In order to meet the requirement in the rule on information disclosure before providing services (COBS 2.2.1 R), a firm should ensure that the disclosure of its charging structure is in clear and plain language and, as far as is practicable, uses cash terms19. If a firm's charging structure is in non-cash terms, examples in cash terms19should be used to illustrate how the charging structure will be applied in practice.
A firm is unlikely to meet its obligations under the fair, clear and not misleading rule and the client's best interests rule unless it ensures that:(1) the charging structure it discloses reflects, as closely as is practicable, the total adviser charge to be paid; for example, the firm should avoid using a wide range; and(2) if using hourly rates in its charging structure, it states whether the rates are indicative or actual hourly rates, provides the basis (if any) upon which
A firm must not use an adviser charge which is structured to be payable by the retail client over a period of time unless (1) or (2) applies:(1) the adviser charge is in respect of an ongoing service for the provision of personal recommendations or related services and: (a) the firm has disclosed that service along with the adviser charge; and6(b) the retail client is provided with a right to cancel the ongoing service, which must be reasonable in all the circumstances, without
6To comply with the rule on providing a retail client with the right to cancel an ongoing service for the provision of personal recommendations or related services without penalty (COBS 6.1A.22R (1)(b)) a firm should:(1) ensure that any notice period of the retail client's right of cancellation is reasonable; (2) not make any charge in respect of cancellation of the ongoing service except for an amount which is in proportion to the extent of the service already provided by the
(1) A firm must agree with and disclose to a retail client the total adviser charge payable to it or any of its associates by a retail client.(2) A disclosure under (1) must:(a) be in cash terms19 (or convert non-cash terms into illustrative cash equivalents);(b) be as early as practicable;(c) be in a durable medium or through a website (if it does not constitute a durable medium) if the website conditions are satisfied; and(d) if there are payments over a period of time, include
3If the price of the retail investment product may vary as a result of fluctuations in the financial markets and the adviser charge is expressed as a percentage of that price, a firm need not disclose to the retail client the total adviser charge payable to the firm or any of its associates by the retail client until after execution of the transaction, provided it then does so promptly.
To comply with the rule on disclosure of total adviser charges (COBS 6.1A.24 R) and the fair, clear and not misleading rule, a firm's disclosure of the total adviser charge should:(1) provide information to the retail client as to which particular service an adviser charge applied to;(2) include information as to when payment of the adviser charge is due; (3) inform the retail client if the total adviser charge varies materially from the charge indicated for that service in the
A firm must keep a record of:(1) its charging structure;(2) the total adviser charge payable by each retail client; and(3) if the total adviser charge paid by a retail client has varied materially from the charge indicated for that service in the firm's charging structure, the reasons for that difference.
In this section:(1) [deleted]2(2) “pension decumulation product” is a product used to access pension savings and includes:2(a) a facility to enable a retail client to make an uncrystallised funds pension lump sum payment; 2(b) an option to take a small lump sum payment; 2(c) a drawdown pension; and2(d) a pension annuity; 2(3) “pension savings” is the proceeds of the client'spersonal pension scheme, stakeholder pension scheme, or occupational pension scheme;(4) “retirement risk
This section applies to a firm communicating with a retail client in relation to:3(1) accessing their pension savings using a pension decumulation product; or3(2) transferring rights accrued under their existing pension scheme to another pension scheme for the purpose of accessing their pension savings using a decumulation product.3
This section does not apply:(1) to a firm giving regulated advice to a retail client on options to access their pension savings;(2) if the firm has already provided the retirement risk warnings to the retail client in relation to their decision to access their pension savings and the firm has reasonable grounds to believe that the retirement risk warnings are still appropriate for the client.
(1) The purpose of this section is to ensure that a firm, which is communicating with a retail client about a pension decumulation product:3(a) explains the nature and purpose of pensions guidance to the retail client;3(b) encourages the retail client to receive pensions guidance; and3(c) gives appropriate retirement risk warnings,3at the point when the retail client has decided how to access their pension savings.(2) If the retail client has not yet decided what to do,2 the firm
(1) This section amplifies Principles 6 and 7, but does not exhaust or restrict what they require. A firm will, in any event, need to ensure that its sales processes are consistent with the Principles and other rules.3(2) An example of a behaviour by a firm that is likely to contravene Principle 6 and may contravene other Principles is for a firm to actively discourage a retail client from receiving pensions guidance, for example by:3(a) indicating in any way that receiving pensions
A firm must follow the steps specified in this section at the point when the retail client has decided (in principle) to take one of the following actions (and before the action is concluded):(1) buy a pension decumulation product; or(2) vary their personal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract to enable the client to:(a) access pension savings using a drawdown pension; or(b) elect to make one-off, regular or
2If the value of the retail client’s pension savings is £10,000 or less and there are no safeguarded benefits, the firm:(1) is not required to ask questions to identify whether any risk factors are present; and(2) must prepare appropriate retirement risk warnings based on the risk factors relevant to each pension decumulation product it offers to enable retail clients to access their pension savings.
To prepare for step 2, the firm should:(1) identify the main risk factors relevant to each pension decumulation product it offers to enable retail clients to access their pension savings; and(2) prepare questions to enable it to identify the presence of those risk factors for different retail clients.
Examples of the sorts of risk factors which relate to pension decumulation products are:(1) the client's state of health;(2) loss of any guarantees;(3) whether the client has a partner or dependants; (4) inflation; (5) whether the client has shopped around; (6) sustainability of income in retirement; (7) tax implications; (8) charges (if a client intends to invest their pension savings); (9) impact on means-tested benefits;(10) debt; and(11) investment scams.
At step 3:2(1) if the value of the retail client's pension savings is £10,000 or less and there are no safeguarded benefits, based on how the retail client wants to access their pension savings, a firm must give the client the appropriate retirement risk warnings prepared under COBS 19.7.9AR(2); and 2(2) in all other cases, a firm must give the retail client appropriate retirement risk warnings in response to the client's answers to the firm's questions.2
For an internet sale, a firm should display the required information on a screen which the retail client must access and acknowledge as part of the sales process. It would not be sufficient for the information to be accessible only by giving the client the option to click on a link or download a document.
6In this section ‘giving advice, or providing services, to an employer in connection with a group personal pension scheme or group stakeholder pension scheme’ includes:(1) giving advice or assistance to an employer on the operation of such a scheme;(2) taking, or helping the employer to take, the steps that must be taken to enable an employee to become a member of such a scheme; and(3) giving advice to an employee, pursuant to an agreement between the employer and the adviser,
12This section does not apply to: (1) 12giving advice, or providing services, to an employer in connection with a group personal pension scheme or group stakeholder pension scheme where that scheme is a qualifying scheme; 13(2) 12a firm in relation to MiFID, equivalent third country or optional exemption business (but see COBS 2.3A (Inducements relating to MiFID, equivalent third country or optional exemption business and insurance-based investment products)); or13(3) a firm carrying
A firm must not pay or accept any fee or commission, or provide or receive any non-monetary benefit, in relation to designated investment business12 carried on for a client other than:(1) a fee, commission or non-monetary benefit paid or provided to or by the client or a person on behalf of the client; or(2) a fee, commission or non-monetary benefit paid or provided to or by a third party or a person acting on behalf of a third party, if:(a) the payment of the fee or commission,
A firm will satisfy the disclosure obligation under this section if it:(1) discloses the essential arrangements relating to the fee, commission or non-monetary benefit in summary form;(2) undertakes to the client that further details will be disclosed on request; and(3) honours the undertaking in (2).[Note:12article 29(2) of the UCITS implementing Directive]7
5COBS 6.1A (Adviser charging and remuneration), COBS 6.1B (Retail investment product provider and operator of an electronic system in relation to lending and platform service provider 10requirements relating to adviser charging and remuneration), COBS 6.1C (Consultancy charging and remuneration) and COBS 6.1D (Product provider requirements relating to consultancy charging and remuneration) set out specific requirements as to when it is acceptable for a firm to pay or receive commissions,
(1) 1If a firm is required to disclose commission (see COBS 6.4) to a client in relation to the sale of a packaged product (other than in relation to arrangements between firms that are in the same immediate group) the firm should not enter into any of the following:(a) volume overrides, if commission paid in respect of several transactions is more than a simple multiple of the commission payable in respect of one transaction of the same kind; and(b) an agreement to indemnify
(1) 1If a firm enters into an arrangement with another firm under which it makes or receives a payment of commission in relation to the sale of a packaged product that is increased in excess of the amount disclosed to the client, the firm is likely to have breached the rules on disclosure of charges, remuneration and commission (see COBS 6.4) and, where applicable, the rule on inducements in COBS 2.3.1R (2)(b), unless the increase is attributable to an increase in the premiums
(1) 1This evidential provision applies in relation to a holding in, or the provision of credit to, a firm which holds itself out as making personal recommendations to retail clients on retail investment products or P2P agreements10, except where the relevant transaction is between persons who are in the same immediate group.55(2) A retail investment product provider5 or operator of an electronic system in relation to lending10 should not take any step which would result in it:5(a)
5Where a retail investment product provider or operator of an electronic system in relation to lending, 10or its associate, provides credit to a retail client of a firm making personal recommendations in relation to retail investment products or P2P agreements10 or giving advice, or providing services, to an employer in connection with a group personal pension scheme or group stakeholder pension scheme6, this may create an indirect benefit for the firm and, to the extent that
(1) 1In relation to the sale of retail investment products,5 the table on reasonable non-monetary benefits (COBS 2.3.15 G) indicates the kind of benefits which are capable of enhancing the quality of the service provided to a client and, depending on the circumstances, are capable of being paid or received without breaching the client's best interests rule. However, in each case, it will be a question of fact whether these conditions are satisfied. 5(2) The guidance in the table
1This table belongs to COBS 2.3.14 G.
Gifts, Hospitality and Promotional Competition Prizes |
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1 |
A retail investment product provider5 giving and a firm receiving gifts, hospitality and promotional competition prizes of a reasonable value. 5 |
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Promotion |
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2 |
A retail investment product provider5 assisting another firm to promote its retail investment products5 so that the quality of its service to clients is enhanced. Such assistance should not be of a kind or value that is likely to impair the recipient firm's ability to pay due regard to the interests of its clients, and to give advice on, and recommend, retail investment products5 available from the recipient firm's whole range or ranges. 555 |
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Joint marketing exercises |
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3 |
A retail investment product provider5 providing generic product literature (that is, letter heading, leaflets, forms and envelopes) that is suitable for use and distribution by or on behalf of another firm if: 5 |
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(a) |
the literature enhances the quality of the service to the client and is not primarily of promotional benefit to the retail investment product provider;5 and 5 |
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(b) |
the total costs (for example, packaging, posting, mailing lists) of distributing such literature to its client are borne by the recipient firm. |
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4 |
A retail investment product provider5 supplying another firm with 'freepost' envelopes, for forwarding such items as completed applications, medical reports or copy client agreements. 5 |
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5 |
A retail investment product provider5 supplying product specific literature (for example, key features documents, minimum information) to another firm if: 5 |
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(a) |
the literature does not contain the name of any other firm; or |
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(b) |
if the name of the recipient firm is included, the literature enhances the quality of the service to the client and is not primarily of promotional benefit to the recipient firm. |
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6 |
A retail investment product provider5 supplying draft articles, news items and financial promotions for publication in another firm's magazine, only if in each case any costs paid by the product provider for placing the articles and financial promotions are not more than market rate, and exclude distribution costs. 5 |
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Seminars and conferences |
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7 |
A retail investment product provider5 taking part in a seminar organised by another firm or a third party and paying toward the cost of the seminar, if: 5 |
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(a) |
its participation is for a genuine business purpose; and |
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(b) |
the contribution is reasonable and proportionate to its participation and by reference to the time and sessions at the seminar when its staff play an active role. |
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Technical services and information technology |
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8 |
A retail investment product provider5 supplying a 'freephone' link to which it is connected. 5 |
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9 |
A retail investment product provider5 supplying another firm with any of the following: 5 |
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(a) |
quotations and projections relating to its retail investment products5 and, in relation to specific investment transactions (or for the purpose of any scheme for review of past business), advice on the completion of forms or other documents; 5 |
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(b) |
access to data processing facilities, or access to data, that is related to the retail investment product provider’s5 business; 5 |
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(c) |
access to third party electronic dealing or quotation systems that are related to the retail investment product provider's5 business; and 5 |
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(d) |
software that gives information about the retail investment product provider's retail investment products5 or which is appropriate to its business (for example, for use in a scheme for review of past business or for producing projections or technical product information). 5 |
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10 |
A retail investment product provider5 paying cash amounts or giving other assistance to a firm not in the same immediate group for the development of software or other computer facilities necessary to operate software supplied by the retail investment product provider,5 but only to the extent that by doing so it will generate equivalent cost savings to itself or clients. 55 |
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11 |
A retail investment product provider5 supplying another firm with information about sources of mortgage finance. 5 |
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12 |
A retail investment product provider5 supplying another firm with generic technical information in writing, not necessarily related to the product provider's business, when this information states clearly and prominently that it is produced by the product provider or (if different) supplying firm. 5 |
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Training |
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13 |
A retail investment product provider5 providing another firm with training facilities of any kind (for example, lectures, venue, written material and software). 5 |
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Travel and accommodation expenses |
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14 |
A retail investment product provider5 reimbursing another firm's reasonable travel and accommodation expenses when the other firm: 5 |
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(a) |
participates in market research conducted by or for the retail investment product provider;5 5 |
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(b) |
attends an annual national event of a United Kingdom trade association, hosted or co-hosted by the retail investment product provider;5 5 |
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(c) |
participates in the retail investment product provider’s5 training facilities (see 13); 5 |
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(d) |
visits the retail investment product provider’s5United Kingdom office in order to: 5 |
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(i) |
receive information about the retail investment product provider's5 administrative systems; or 5 |
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(ii) |
attend a meeting with the retail investment product provider5 and an existing or prospective client of the receiving firm. 5 |
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1In interpreting the table of reasonable non-monetary benefits, retail investment product providers5 should be aware that where a benefit is made available to one firm and not another, this is more likely to impair compliance with the client's best interests rule and that, where any benefits of substantial size or value (such as adviser training programmes or significant software) are made available to firms that are subject to the rules on adviser charging and remuneration (COBS
5In interpreting the table of reasonable non-monetary benefits, a firm that provides a personal recommendation in relation to a retail investment product to a retail client or gives advice, or provides a service, to an employer in connection with a group personal pension scheme or a group stakeholder pension scheme6 should be aware that acceptance of benefits on which the firm will have to rely for a period of time is more likely to impair compliance with the client's best interests
(1) A firm must make a record of the information disclosed to the client in accordance with COBS 2.3.1R (2)(b)4 and must keep that record for at least five years from the date on which it was given.4(2) A firm must also 4make a record of each benefit given to another firm which does not have to be disclosed to the client4in accordance with COBS 2.3.1R (2)(b)(ii),4 and must keep that record for at least five years from the date on which it was given.1412
A range of stakeholder products:1(1) may include more than one deposit-based stakeholder product;1(2) may include the stakeholder products of more than one stakeholder product provider;1(3) must not include any more than one:1(a) CISstakeholder product or linked life stakeholder product; or1(b) stakeholder CTF; or1(c) stakeholder pension scheme.1
When a firm provides basic advice it must:1(1) explain why it chose the stakeholder products and stakeholder product providers that appear in the relevant range; and1(2) give the client a list of the stakeholder products and stakeholder product providers that appear in that range;1if the client asks it do so.1
When a firm first has contact with a retail client with a view to giving basic advice on a stakeholder product, it must give the retail client:1(1) the basic advice initial disclosure information (COBS 9 Annex 1), in a durable medium, together with an explanation of that information, unless:1(a) it has already done so and the basic advice initial disclosure information is likely still to be accurate and appropriate; or1(b) the contact is not face to face and is using a means of
If a firm's first contact with a retail client is not face to face, it must:1(1) inform the client at the outset:1(a) (if the communication is initiated by or on behalf of a firm), of the name of the firm and the commercial purpose of the communication;1(b) [deleted]33(c) that the firm will provide the retail client with basic advice without carrying out a full assessment of the retail client's needs and circumstances; and1(d) that such information will be confirmed in writing;
When a firm gives basic advice it must not:1(1) describe or recommend a stakeholder product outside the firm'srange; or1(2) describe or recommend a smoothed linked long term stakeholder product; or1(3) describe fund choice, or recommend a particular fund, if a stakeholder product offers a choice of funds; or1(4) recommend the level of contributions required to be made to a stakeholder pension scheme to achieve a specific income in retirement; or1(5) recommend or agree that a client
(1) If a firm starts the sales process for a stakeholder product that is not a deposit-based stakeholder product, it must not depart from that process unless it has advised the retail client that it will not provide basic advice on stakeholder products during the period of departure. A firm that does that must not provide basic advice during the departure period.1(2) Before a firm returns to the sales process for stakeholder products, it must tell the retail client that that process
1A firm must only recommend a stakeholder product to a retail client if:(1) it has taken reasonable steps to assess the client's answers to the scripted questions and any other facts, circumstances or information disclosed by the client during the sales process;(2) (unless the relevant product is a deposit-based stakeholder product) having done so, it has reasonable grounds for believing that the stakeholder product is suitable for the client; and(3) the firm reasonably believes
1If a firm giving basic advice recommends to a retail client to acquire a stakeholder product, it must ensure that, before the conclusion of the contract, its representative:(1) (unless the relevant product is a deposit-based stakeholder product) explains to the client, if necessary in summary form, but always in a way that will allow the client to make an informed decision about the firm's recommendation:(a) the nature of the stakeholder product; and(b) the "aims", "commitment"
1Notwithstanding COBS 9.6.14R (2) a firm may provide the summary sheet (COBS 9.6.14R (2)) as soon as reasonably practicable after the conclusion of the contract if the client asks it to do so, or the contract will be concluded using a means of distance communication that does not enable the provision of the summary sheet in a durable medium before the conclusion of the contract, but only if the firm:(1) reads the summary sheet to the client before it concludes the contract; and(2)
1A firm must ensure that none of its representatives:(1) is likely to be influenced by the structure of his or her remuneration to give unsuitable basic advice on stakeholder products to a retail client; or(2) refers a retail client to another firm in circumstances which would amount to the provision of any fee, commission or non-monetary benefit.
(1) 1A firm must make an up-to-date record of:(a) its scope of basic advice, and the scope of basic advice used by its appointed representatives (if any); and(b) its range (or ranges) of stakeholder products, and the range (or ranges) used by its appointed representatives (if any).(2) Those records must be retained for five years from the date on which they are replaced by a more up-to-date record.
3(1) This section applies to a firm that carries on any distance marketing activity from an establishment in the United Kingdom, with or for a consumer in the United Kingdom9. 3(2) If a firm is an intermediary rather than the supplier under the distance contract, references to 'firm' in COBS 5 Annex 1 R and COBS 5 Annex 2 R are to be interpreted as referring to the supplier except for references to 'firm' in COBS 5 Annex 1 R (2), (4) and (18).3
A firm must ensure that the distance marketing information, the commercial purpose of which must be made clear, is provided in a clear and comprehensible manner in any way appropriate to the means of distance communication used, with due regard, in particular, to the principles of good faith in commercial transactions, and the legal principles governing the protection of those who are unable to give their consent, such as minors. [Note: article 3(2) of the Distance Marketing
A firm must ensure that information on contractual obligations to be communicated to a consumer during the pre-contractual phase is in conformity with the contractual obligations which would result from the law presumed to be applicable to the distance contract if that contract is concluded. [Note: article 3(4) of the Distance Marketing Directive]
A firm must communicate to the consumer all the contractual terms and conditions and the information referred to in the distance marketing disclosure rules (COBS 5.1.1 R to COBS 5.1.4 R) on a durable medium available and accessible to the consumer in good time before the consumer is bound by any distance contract or offer. [Note: article 5(1) of the Distance Marketing Directive]
In the case of a distance contract comprising an initial service agreement, followed by successive operations or a series of separate operations of the same nature performed over time, the rules in this section only apply to the initial agreement. [Note: article 1(2) of the Distance Marketing Directive]
If there is no initial service agreement but the successive operations or separate operations of the same nature performed over time are performed between the same contractual parties, the distance marketing disclosure rules (COBS 5.1.1 R to COBS 5.1.4 R) will only apply: (1) when the first operation is performed; and(2) if no operation of the same nature is performed for more than a year, when the next operation is performed (the next operation being deemed the first in a new
In this section:(1) 'initial service agreement' includes the opening of a bank account and the concluding of a portfolio management contract;(2) 'operations' includes transactions made within the framework of a portfolio management contract; and5(3) adding new elements to an initial service agreement, such as the ability to use an electronic payment instrument together with one's existing bank account, does not constitute an 'operation' but an additional contract to which the
In the FCA's view, other examples of:(1) 'initial service agreement' include:(a) subscribing to an investment trust savings scheme; or(b) concluding a life policy, personal pension scheme or stakeholder pension scheme that includes a pre-selected option providing for future increases or decreases in regular premiums or payments; and(2) 'operations' include:(a) successive purchases or sales of shares under an investment trust savings scheme; and(b) subsequent index-linked changes
In the case of a voice telephony communication, and subject to the explicit consent of the consumer, only the abbreviated distance marketing information (COBS 5 Annex 2R ) needs to be provided during that communication. However, a firm must still provide the distance marketing information (COBS 5 Annex 1R ) on a durable medium available and accessible to the consumer in good time before the consumer is bound by any distance contract or offer, unless another exception applies.
A firm may provide the distance marketing information (COBS 5 Annex 1R ) and the contractual terms and conditions in a durable medium immediately after the conclusion of a distance contract, if the contract has been concluded at a consumer's request using a means of distance communication that does not enable the provision of that information in that form in good time before the consumer is bound by any distance contract or offer. [Note: article 5(2) of the Distance Marketing
4Where a distance contract is also a contract for payment services to which the Payment Services Regulations apply, a firm is required to provide to the consumer only the information specified in rows 7 to 12, 15, 16 and 20 of COBS 5 Annex 1 R. [Note: article 4(5) of the Distance Marketing Directive]
4Where a distance contract covers both payment services and non-payment services, this exception applies only to the payment services aspects of the contract. A firm taking advantage of this exception will need to comply with the information requirements in Part 876 of the Payment Services Regulations.8
If, at any time during the contractual relationship, a consumer that is a party to a distance contract asks a firm:(1) for a paper copy of the terms and conditions of that contract; or(2) to change the means of distance communication used;the firm must provide that paper copy or change the means of distance communication used, unless (in the latter case) that would be incompatible with the contract or the nature of the service provided. [Note: article 5(3) of the Distance Marketing
(1) A firm must not enforce, or seek to enforce, any obligations under a distance contract against a consumer, in the event of an unsolicited supply of services, the absence of reply not constituting consent.(2) This rule does not apply to the tacit renewal of a distance contract. [Note: article 9 of the Distance Marketing Directive]
If a firm proposes to enter into a distance contract with a consumer that will be governed by the law of a country outside the United Kingdom9, the firm must ensure that the consumer will not lose the protection created by the rules in this section if the distance contract has a close link with the territory of the United Kingdom9. [Note: articles 12 and 16 of the Distance Marketing Directive]
(1) 1This section applies to a firm that gives advice, or provides services, to an employer in connection with a group personal pension scheme or group stakeholder pension scheme.(2) Without prejudice to (1), this section does not apply to a firm that makes a personal recommendation to a retail client in relation to a retail investment product.
In this section ‘giving advice, or providing services, to an employer in connection with a group personal pension scheme or group stakeholder pension scheme’ includes:(1) giving advice or assistance to an employer on the operation of such a scheme;(2) taking, or helping the employer to take, the steps that must be taken to enable an employee of the employer to become a member of such a scheme; and(3) giving advice to an employee, pursuant to an agreement between the employer and
COBS 6.1C.1 (Application - Who? What?) and COBS 6.1C.3 (Interpretation) mean (for example) that the cost of any advice given to an employee pursuant to an agreement between the employer and the adviser about the benefits that are, or might be, available to the employee if he is, or if he becomes, a member of a group personal pension scheme or group stakeholder pension scheme are subject to the rules in this section, not the rules on adviser charging (COBS 6.1A).
Except as specified in COBS 6.1C.5A R,4COBS 6.1C.5B R and COBS 6.1C.5C R4,3 a firm must:4(1) only be remunerated for giving advice, or providing services, to an employer in connection with a group personal pension scheme or group stakeholder pension scheme by consultancy charges or by a fee payable by the employer;(2) not solicit or accept (and ensure that none of its associates solicits or accepts) any other commissions, remuneration or benefit of any kind in relation to that
3A firm and its associates may, except in relation to a qualifying scheme: 4(1) solicit and accept a commission, remuneration or benefit of any kind in the circumstances set out in COBS 6.1C.5 R if:(a) the employer’s part of the relevant scheme was established on or before 30 December 2012; and(b) the solicitation and acceptance of the commission, remuneration or benefit of any kind was permitted by the rules in force on 30 December 2012; and(2) enter into an arrangement under
3If an employer chooses to appoint a firm to provide advice or services in connection with a group personal pension scheme or a group stakeholder pension scheme and that firm or its associate enters into an arrangement in COBS 6.1C.5AR (2), the firm must:(1) before the arrangement is entered into, disclose to the employer that the transfer of the commission, remuneration or benefit of any kind will be requested by the firm or its associate;(2) throughout the period during which
Examples of payments and benefits that should not be accepted under the requirement only to be paid through consultancy charges include:(1) a share of the charges applied to a group personal pension scheme, group stakeholder pension scheme or the scheme provider’s revenues or profits (except if the firm providing the advice to an employer in relation to such a scheme is the scheme provider);(2) a commission set and payable by a retail investment product provider in any jurisdiction.Requirements
If the firm or its associate is the group personal pension scheme or group stakeholder pension scheme provider, the firm must ensure that the level of its consultancy charges is at least reasonably representative of the cost associated with giving the advice to the employer in relation to the relevant scheme.
A consultancy charge is likely to be reasonably representative of the cost of the 6services associated with giving advice, or providing services, to an employer in connection with a group personal pension scheme or group stakeholder pension scheme if:(1) the total6 expected6 costs associated with advising the employer in relation to the group personal pension scheme or group stakeholder pension scheme will:6(a) be recovered through consultancy charges; and6(b) not be recovered
(1) In determining its charging structure and consultancy charges a firm should have regard to the best interests of the employer and the employer’s employees.(2) A firm may not be acting in the best interests of the employer and the employer’s employees if it:(a) varies its consultancy charges inappropriately according to product provider; or(b) allows the availability or limitation of services offered by third parties to facilitate the payment of consultancy charges to influence
A firm is likely to be viewed as operating a charging structure that conceals the amount or purpose of its consultancy charges if, for example, it makes arrangements for amounts in excess of its consultancy charges to be deducted from an employee’s investments from the outset, in order to be able to provide a cash payment to the employer or employee later.
A firm should ensure that the disclosure of its charging structure is in clear and plain language and, as far as is practicable, uses cash terms7. If a firm's charging structure is in non-cash terms, examples in cash terms7 should be used to illustrate how the charging structure will be applied in practice.
(1) A firm must agree with and disclose to an employer the total consultancy charge payable to it or any of its associates.(2) A disclosure under (1) must:(a) be in cash terms7 (or convert non-cash terms into illustrative cash equivalents);(b) be made as early as practicable and, in any event, before the employer: (i) selects a particular group personal pension scheme or group stakeholder pension scheme for the benefit of its employees; or(ii) if applicable, reviews its group
To comply with the rule on disclosure of total consultancy charges payable (COBS 6.1C.18R) and the fair, clear and not misleading rule, a firm's disclosure of the total consultancy charge should:(1) provide information to the employer as to which particular service a consultancy charge applies;(2) include information as to when payment of the consultancy charge is due;(3) if an ongoing consultancy charge is expressed as a percentage of funds under management, clearly reflect in
When an employer asks a firm to provide advice to the employer’s employees, the firm:(1) may make a consultancy charge for the cost of preparing and giving advice to each employee who chooses to accept his employer’s offer of advice;(2) must not make a consultancy charge for the cost of preparing or giving advice to an employee who chooses not to accept the offer of advice; (3) (if the firm prepares generic advice to be given to more than one employee) must not make more than
A firm must keep a record of:(1) its charging structure;(2) the consultancy charges payable by each employer and each of the employer’s employees; and(3) if the consultancy charge for a particular service has varied materially from that indicated in the firm's charging structure, the reasons for that difference.
A firm6 when it is carrying on scheme management activity or, for an AIFM, AIFM investment management functions6:
6- (1)
must comply with the COBSrules specified in the table, as modified by this section; and
- (2)
need not comply with any other rule in COBS.
12Table: Application of conduct of business rules
Chapter, section, rule
Small authorised UK AIFM and a residual CIS operator
1 (Application)
Applies
2.1.1R (The client’s best interests rule)
Applies
2.3 (Inducements relating to business other than MiFID, equivalent third country or optional exemption business)
Applies
2.3B (Inducements and research)
Applies, as modified by COBS 18 Annex 1
2.4 (Agent as client and reliance on others)
Applies
4.2.1R, 4.2.2G and 4.2.3G (The fair, clear and not misleading rule)
Applies
5.2 (E-commerce)
Applies
11.2 (Best execution for AIFMs and residual CIS operators)
Applies to a small authorised UK AIFM of an authorised AIF. Applies (as modified by COBS 18.5.4R) to a small authorised UK AIFM of an unauthorised AIF or residual CIS operator.
11.3 (Client order handling)
Applies
16.3 (Periodic reporting)
Applies to a small authorised UK AIFM of an unauthorised AIF which is not a collective investment scheme, as modified by COBS 18.5.4BR. Otherwise does not apply.
18.5 (Residual CIS operators and small authorised UK AIFMs)
Applies
18 Annex 1 (Research and inducements for collective portfolio managers)
Applies (subject to COBS 18.5.3CR)
18 Annex 2 (Record keeping: client orders and transactions)
Applies
Where6COBSrules specified in the table in COBS 18.5.2 R apply to a firm carrying on scheme management activity12 or, for an AIFM, AIFM investment management functions, the following modifications apply:666(1) subject to (2), references to customer or client are to be construed as references to any fund6for12 which the firm6 is acting or intends to act12; 66(2) in the case of a small authorised UK AIFM of an unauthorised AIF or a residual CIS operator6, when a firm6 is required
The best execution provisions in COBS 11.2 (Best execution for AIFMs and residual CIS operators) do not apply12 to a small authorised UK AIFM of an unauthorised AIF or a residual CIS operator6 of12 a fund6 whose fund6 documents include a statement that best execution does not apply in relation to the fund6 and in which:6666(1) no investor6 is a retail client; or6(2) no current investor in the fund6 was a retail client when it invested in the fund.666
A small authorised UK AIFM of an unauthorised AIF or a residual CIS operator6 must not accept a retail client as an investor in the fund6 unless it has taken reasonable steps to offer and, if requested, provide to the potential investor, fund6 documents which adequately describe how thefund6 is governed.666
The fund documents required under COBS 18.5.5 R6 may consist of any number of documents provided that it is clear that collectively they constitute the fund6 documents and provided the use of several documents in no way diminishes the significance of any of the statements which are required to be given to the potential investor.6666
The fund documents of an unauthorised fund managed by a small authorised UK AIFM or a residual CIS operator (if those fund documents6 exist) should make it clear that if an investor6 is reclassified as a retail client, this reclassification will not affect certain activities of the firm6. In particular, despite such a reclassification, the firm6 will not be required to comply with the best execution provisions. It should be noted that there is no requirement that fund6 documents
Where the fund is an unauthorised fund managed by a small authorised UK AIFM or a residual CIS operator6 and no current investor6 in the fund6 was a retail client when it invested in the fund6, the fund6 documents must include a statement that:66666(1) explains that if an investor6 is reclassified as a retail client subsequent to investing in the fund6, then the firm6 may continue to treat all investors in the fund6 as though they were not retail clients; 6666(2) explains that
A small authorised UK AIFM of an unauthorised AIF or a residual CIS operator will still have to comply with other COBS provisions as a result of the reclassification of an investor6 as a retail client. For example, the firm must6 provide periodic statements to investors6 who are retail clients in an unauthorised fund6 (see the rule on periodic statements for an unauthorised fund6 (COBS 18.5.11 R6)).666666
- (1)
In order to provide adequate information to describe how the fund6 is governed, a small authorised UK AIFM of an unauthorised AIF or a residual CIS operator6 should include in the fund6 documents a provision about each of the items of relevant information set out in the following table (Content of fund6 documents).
666 - (2)
Compliance with (1) may be relied on as tending to establish compliance with COBS 18.5.5 R.
- (3)
Contravention of (1) may be relied on as tending to establish contravention of COBS 18.5.5 R.
Table: Content of fund6 documents
666Thefund6 documents should include provision about: 6 |
|||
(1) |
Regulator The firm statutory status in accordance with GEN 4 Annex 1 R (Statutory status disclosure); |
||
(2) |
Services the nature of the services that the firm will provide6; 6 |
||
(3) |
Payments for services details of any payment for services payable by the fund or from the property of the fund6 or investors in the fund to the firm6, including where appropriate: 66 |
||
(a) |
the basis of calculation; |
||
(b) |
how it is to be paid and collected; |
||
(c) |
how frequently it is to be paid; and |
||
(d) |
whether or not any other payment is receivable by the firm6 (or to its knowledge by any of its associates) in connection with any transactions effected by the firm6 with or for the fund6, in addition to or in lieu of any fees; 666 |
||
(4) |
Commencement when and how the firm6 is appointed; 6 |
||
(5) |
Accounting the arrangements for accounting to the fund or investors in the fund6 for any transaction effected; 6 |
||
(6) |
Termination method how the appointment of the firm6 may be terminated; 6 |
||
(7) |
Complaints procedure how to complain to the firm6 and a statement that the investors in the fund6 may subsequently complain direct to the Financial Ombudsman Service; 66 |
||
(8) |
Compensation whether or not compensation may be available from the compensation scheme should the firm6 be unable to meet its liabilities, and information about any other applicable compensation scheme; and, for each applicable compensation6 scheme, the extent and level of cover and how further information can be obtained; 6 |
||
(9) |
Investment objectives the investment objectives for the portfolio of the fund6; 6 |
||
(10) |
Restrictions |
||
(a) |
any restrictions on: |
||
(i) |
the types of investments or property which may be included in the portfolio of the fund6; 6 |
||
(ii) |
the markets on which investments or property may be acquired for the portfolio of the fund6; 6 |
||
(iii) |
the amount or value of any one investment or asset, or on the proportion of the portfolio of the fund6 which any one investment or asset or any particular kind of investment or asset may constitute; or 6 |
||
(b) |
that there are no such restrictions; |
||
(11) |
Holding fund6 assets 6 |
||
(a) |
if it is the case, that the firm6 will: 6 |
||
(i) |
hold money on behalf of the fund6 or be the custodian of investments or other property of the fund6; or 66 |
||
(ii) |
arrange for some other person to act in either capacity and, if so, whether that person is an associate of the firm6 identifying that person and describing the nature of any association; and 6 |
||
(b) |
in either case: |
||
(i) |
how any money is to be deposited; |
||
(ii) |
the arrangements for recording and separately identifying registrable investments of the fund6 and, where the registered holder is the firm's6 own nominee, that the firm6 will be responsible for the acts and omissions of that person; 666 |
||
(iii) |
the extent to which the firm6 accepts liability for any loss of the investment of the fund6; 66 |
||
(iv) |
the extent to which the firm6 or any other person mentioned in (11)(a)(ii), may hold a lien or security interest over investments of the fund6; 66 |
||
(v) |
where investments of the fund6 will be registered collectively in the same name, a statement that the entitlements of the fund6 may not be identifiable by separate certificates or other physical documents of title, and that, should the firm6 default, any shortfall in investments of the fund6 registered in that name may be shared proportionately among all fund6 and any other customers of the firm6 whose investments are so registered; 666666 |
||
(vi) |
whether or not investments or other property of the fund6 can be lent to, or deposited by way of collateral with, a third party and whether or not money can be borrowed on behalf of the fund6 against the security of those investments or property and, if so, the terms upon which they may be lent or deposited; 66 |
||
(vii) |
the arrangements for accounting to the fund6 for investments of the fund6, for income received (including any interest on money and any income earned by lending investments or other property) of the fund6, and for rights conferred in respect of investments or other property of the fund6; 666 |
||
(viii) |
the arrangements for determining the exercise of any voting rights conferred by investments of the fund6; and 6 |
||
(ix) |
where investments of the fund6 may be held by an eligible custodian outside the United Kingdom, a general statement that different settlement, legal and regulatory requirements, and different practices relating to the segregation of those investments, may apply; 6 |
||
(12) |
Clients' money outside the United Kingdom if it is the case, that the firm6 may hold the money of the fund6 in a client bank account outside the United Kingdom; 66 |
||
(13) |
Exchange rates if a liability of the fund6 in one currency is to be matched by an asset in a different currency, or if the services to be provided to the firm for the fund6 may relate to an investment denominated in a currency other than the currency in which the investments of the fund6 are valued, a warning that a movement of exchange rates may have a separate effect, unfavourable or favourable, on the gain or loss otherwise made on the investments of the fund6; 6666 |
||
(14) |
Stabilised investments if it is the case, that the firm6 is to have the right under the fund6documents to effect transactions in investments the prices of which may be the subject of stabilisation; 66 |
||
(15) |
Conflict of interest and material interest if it is the case, that the firm6 is to have the right under the agreement or instrument constituting the fund6 to effect transactions on behalf of the fund6 in which the firm6 has directly or indirectly a material interest (except for an interest arising solely from the investment of the firm6 as agent for the fund6), or a relationship of any description with another party which may involve a conflict with the firm6 duty to the fund6, together with a disclosure of the nature of the interest or relationship; 66666666 |
||
(16) |
Research and inducements12 how the firm intends to pay for research. For example, whether the firm proposes to pay for research directly or to use a research payment account12; 66 |
||
(17) |
Acting as principal if it is the case, that the firm6 may act as principal in a transaction with the fund6; 66 |
||
(18) |
Stock lending if it is the case, that the firm6 may undertake stock lending activity with or for the fund6 specifying the type of assets of the fund6 to be lent, the type and value of relevant collateral from the borrower and the method and amount of payment due to the fund6 in respect of the lending; 6666 |
||
(19) |
Transactions involving contingent liability investments |
||
(a) |
if it is the case, that the agreement orinstrument constituting the fund6 allows the firm6 to effect transactions involving contingent liability investments for the account of the portfolio of the fund6; 666 |
||
(b) |
if applicable, whether there are any limits on the amount to be committed by way of margin and, if so, what those limits are; and |
||
(c) |
if applicable, that the firm6 has the authority to effect transactions involving contingent liability investments otherwise than under the rules of a recognised investment exchange and in a contract traded thereon; 68 |
||
(20) |
Periodic statements |
||
(a) |
the frequency of any periodic statement (this should not be less than once every 12 months) except where a periodic statement is not required (see COBS 18.5.13R); and |
||
(b) |
whether those statements will include some measure of performance, and, if so, what the basis of that measurement will be; |
||
(21) |
Valuation the bases on which assets comprised in the portfolio of the fund6 are to be valued; 6 |
||
(22) |
Borrowings if it is the case, that the firm6 may supplement the funds in the portfolio of the fund6 and, if it may do so: 66 |
||
(a) |
the circumstances in which the firm6 may do so; 6 |
||
(b) |
whether there are any limits on the extent to which the firm6 may do so and, if so, what those limits are; and 6 |
||
(c) |
any circumstances in which such limits may be exceeded; |
||
(23) |
Underwriting commitments if it is the case, that the firm6 may for the account of the portfolio of the fund6 underwrite or sub-underwrite any issue or offer for sale of securities, and: 66 |
||
(a) |
whether there are any restrictions on the categories of securities which may be underwritten and, if so, what these restrictions are; and |
||
(b) |
whether there are any financial limits on the extent of the underwriting and, if so, what these limits are; |
||
(24) |
Investments in other funds6 whether or not the portfolio may invest in fund either managed or advised by the firm6 or by an associate of the firm or in a fund6 which is not a regulated collective investment scheme; 666 |
||
(25) |
Investments in securities underwritten by the firm6 whether or not the portfolio may contain securities of which any issue or offer for sale was underwritten, managed or arranged by the firm6 or by an associate of the firm6 during the preceding 12 months. 666 |
||
A small authorised UK AIFM of an unauthorised AIF or a residual CIS operator6 must, subject to the exceptions from the requirement to provide a periodic statement, provide to investors in the fund6, promptly and at suitable intervals, a statement in a durable medium which contains adequate information on the value and composition of the portfolio of the fund6 at the beginning and end of the period of the statement.666
(1) A small authorised UK AIFM of an unauthorised AIF or a residual CIS operator6 should act in accordance with the provisions in the right hand column of the periodic statements table (see COBS 18.5.15E) to fulfil the requirement to prepare and issue periodic statements indicated in the left hand column against these provisions.6(2) Compliance with (1) may be relied on as tending to establish compliance with the requirement to prepare and issue periodic statements.66(3) Contravention
(1) A small authorised UK AIFM of an unauthorised AIF or a residual CIS operator6 need not provide a periodic statement:6(a) (i) to an investor in the fund6 who is a retail client ordinarily resident outside the United Kingdom; or6(ii) to an investor in the fund6 who is a professional client; if the investor6 has so requested or the firm6 has taken reasonable steps to establish that the investor6 does not wish to receive it; or6666(b) if it would duplicate a statement to be provided
A small authorised UK AIFM of an unauthorised AIF or a residual CIS operator6 must make a copy of any periodic statement it has provided in accordance with the requirement to prepare and issue periodic statements to investors in the fund6. The record must be retained for a minimum period of three years.66
Table: Periodic statements
This table belongs to COBS 18.5.12 E.
Periodic statements |
|||||
Suitable intervals |
(1) |
A periodic statement should be provided at least: |
|||
(a) |
six-monthly; or |
||||
(b) |
once in any other period, not exceeding 12 months, which has been mutually agreed between the firm and the investor in the fund.6 6 |
||||
Adequate information |
(2) |
(a) |
A periodic statement should contain: |
||
(i) |
(A) |
The information set out in the table of general contents of a periodic statement; |
|||
(B) |
where the portfolio of the fund6 includes uncovered open positions in contingent liability investments, the additional information in the table listing the contents of a periodic statement (see COBS 18.5.18 E6) in respect of contingent liability investments; or 66 |
||||
(ii) |
such information as an investor6 who is a retail client ordinarily resident outside the United Kingdom, or a professional client, has on his own initiative agreed with the firm6 as adequate. 66 |
||||
(b) |
[deleted]13 |
||||
Examples of uncovered open positions include:(1) selling a call option on an investment not held in the portfolio;(2) unsettled sales of call options on currency in amounts greater than the portfolio's holding of that currency in cash or in readily realisable investments denominated in that currency; and (3) transactions having the effect of selling an index to an amount greater than the portfolio's holdings of investments included in that index.
Table: General contents of a periodic statement
This table belongs to COBS 18.5.15 E.
General contents of periodic statements |
|||
1 |
Contents and value |
||
(a) |
As at the beginning of the account period, the total value of the portfolio of the fund6, being either: 6 |
||
(i) |
the value of the assets comprised in the portfolio on the date as at which the statement provided for the immediately preceding period of account is made up; or |
||
(ii) |
in the case of the first periodic statement, the value of the assets comprised in the portfolio on the date on which the firm6 assumed responsibility for the management of the portfolio. 6 |
||
(b) |
As at the end of the account period: |
||
(i) |
the number, description and value of each investment held on behalf of the fund6; 6 |
||
(ii) |
the amount of cash held on behalf of the fund6; and 6 |
||
(iii) |
the total value of the portfolio of the fund6. 6 |
||
2 |
Basis of valuation A statement of the basis on which the value of each investment has been calculated and, if applicable, a statement that the basis for valuing a particular investment has changed since the previous periodic statement. Where any investments are shown in a currency other than the usual one used for valuation of the portfolio of the fund6, the relevant currency exchange rates must be shown. 6 |
||
3 |
Details of any assets loaned or charged |
||
(a) |
A summary of those investments (if any) which were, at the closing date, loaned to any third party and those investments (if any) that were at that date charged to secure borrowings made on behalf of the portfolio of the fund6; and 6 |
||
(b) |
the aggregate of any interest payments made and income received during the account period in respect of loans or borrowings made during the period. |
||
4 |
Transactions and changes in composition Except in the case of a portfolio which aims to track the performance of an external index: |
||
(a) |
a statement that summarises the transactions entered into for the portfolio of the fund6 during the period; and 6 |
||
(b) |
the aggregate of money and a summary of all investments transferred into and out of the portfolio of the fund6 during the period; and 6 |
||
(c) |
the aggregate of any interest payments, dividends and other benefits received by the firm6 for the portfolio of the fund6 during that period. 66 |
||
5 |
Charges and remuneration If not previously advised in writing, a statement for the account period: |
||
(a) |
of the aggregate charges of the firm6 and its associates; and 6 |
||
(b) |
of any remuneration received by the firm6 or its associates or both from a third party in respect of the transactions entered into, or any other services provided, for the portfolio of the fund6. 66 |
||
6 |
Movement in value of portfolio A statement of the difference between the value of the portfolio at the closing date and its value at the starting date of the account period, having regard at least, during the account period, to the following: |
||
(a) |
the aggregate of assets received from investors of the fund6 and added to the portfolio of the fund6; 66 |
||
(b) |
the aggregate of the value of assets transferred, or of amounts paid, to thefund;6 6 |
||
(c) |
the aggregate income received on behalf of the fund6 in respect of the portfolio; and 6 |
||
(d) |
the aggregate of realised and unrealised profits or gains and losses attributable to the assets comprised in the portfolio of the fund6. 6 |
||
Notes: For the purposes of Item 1, where the fund6 is a property enterprise trust, it will be sufficient for the periodic statement to disclose the number of properties held in successive valuation bands where this is appropriate to the size and composition of the fund6, rather than the value of each asset in the portfolio. The valuation bands of over £10m, £5-£10m, £2.5-£5m, £1-£2.5m and under £1m would be appropriate, unless a firm6 could show that different bands were justifiable in the circumstances. The statement to be provided under Item 6 is not intended to be an indicator of the performance of the portfolio of the fund.6 A firm6 may wish to distinguish capital and income, and thereby provide more information than referred to in this table. If the statement includes some measure of performance, the basis of measurement should be stated. 666 |
|||
Table: Contents of a periodic statement in respect of contingent liability investments
This table belongs to COBS 18.5.15 E.
Contents of a periodic statement in respect of contingent liability investments |
||
(1) |
Changes in value The aggregate of money transferred into and out of the portfolio of the fund6 during the account period. 6 |
|
(2) |
Open positions In relation to each open position in the portfolio of the fund6 at the end of the account period, the unrealised profit or loss to the portfolio of the fund6 (before deducting or adding any commission which would be payable on closing out). 66 |
|
(3) |
Closed positions In relation to each transaction effected during the account period to close out a position of the fund6, the resulting profit or loss to the portfolio of the fund6 after deducting or adding any commission. (Instead of the specific detail required by Items 2 or 3, the statement may show the net profit or loss in respect of the overall position of the fund6 in each contract) 66 |
|
(4) |
Aggregate of contents The aggregate of each of the following in, or relating to, the portfolio of the fund6 at the close of business on the valuation date: 6 |
|
(a) |
cash; |
|
(b) |
collateral value; |
|
(c) |
management fees; and |
|
(d) |
commissions attributable to transactions during the period or a statement that this information has been separately disclosed in writing on earlier statements or confirmations to the investor.6 6 |
|
(5) |
Option account valuations In respect of each open option comprising the portfolio of the fund6 on the valuation date: 6 |
|
(a) |
the share, future, index or other investment or asset involved; |
|
(b) |
(unless the valuation statement follows the statement for the period in which the option was opened) the trade price and date for the opening transaction; |
|
(c) |
the market price of the contract; and |
|
(d) |
the exercise price of the contract. |
|
Options account valuations may show an average trade price and market price in respect of an option series where a number of contracts within the same series have been purchased on behalf of the fund.6 6 |
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In this section ‘giving advice, or providing services, to an employer in connection with a group personal pension scheme or group stakeholder pension scheme' includes:(1) giving advice or assistance to an employer on the operation of such a scheme;(2) taking, or helping the employer to take, the steps that must be taken to enable an employee of the employer to become a member of such a scheme; and(3) giving advice to an employee, pursuant to an agreement between the employer and
(1) Except as specified in COBS 6.1D.6A R,1 a firm must not offer or pay (and must ensure that none of its associates offers or pays) any commissions, remuneration or benefit of any kind to another firm, an employee benefit consultant or to any other third party for the benefit of that firm, employee benefit consultant or third party in relation to the sale or purchase of: (a) a group personal pension scheme or group stakeholder pension scheme, whether or not that sale or purchase
1A firm and its associates may, except in connection with a qualifying scheme: 3(1) offer and pay a commission, remuneration or benefit of any kind in the circumstances set out in COBS 6.1D.4 R if:(a) the employer’s part of the relevant scheme was established on or before 30 December 2012; and(b) the offer or payment was permitted by the rules in force on 30 December 2012; and(2) enter into an arrangement under which the right to receive the commission, remuneration or benefit
A firm must:(1) take reasonable steps to ensure that its group personal pension scheme and group stakeholder pension scheme charges are not structured so that they could mislead or conceal from an employer the distinction between those charges and any consultancy charges payable in respect of the scheme; and(2) not include in any marketing materials in respect of its group personal pension schemes or group stakeholder pension schemes any statements about the appropriateness of
A firm that offers to facilitate, directly or through a third party, the payment of consultancy charges must:2(1) obtain and validate instructions from the relevant employer in relation to the consultancy charge; (2) offer sufficient flexibility in terms of the consultancy charges it facilitates;(3) not pay out or advance consultancy charges to the firm to which the consultancy charge is owed over a materially different time period, or on a materially different basis to that in
2A firm facilitates the payment of consultancy charges for the purposes of COBS 6.1D.9 R by:(1) selling all or part of, or rights under, the employee’s investment in a group personal pension scheme or group stakeholder pension scheme to pay the consultancy charge; or(2) disposing of or reducing all or part of the employee’s rights under the group personal pension scheme or group stakeholder pension scheme (for example, by way of a part disposal which creates benefits under a life
A firm should consider whether the flexibility in levels of consultancy charges it offers to facilitate is sufficient so as not to unduly influence or restrict the charging structure and consultancy charges that the firm providing advice to an employer in relation to a group personal pension scheme or group stakeholder pension scheme can use.
To comply with COBS 6.1D.11R, a firm's disclosure should be in cash terms4 (or convert non-cash terms into illustrative cash equivalents) and should:(1) include information as to the period over which the consultancy charge is payable;(2) provide information on the implications for the employee if the employee leaves the employer’s service or their contributions to the group personal pension scheme or group stakeholder pension scheme are cancelled before the consultancy charge
(1) The guidance in this section relates to the obligations to assess suitability in COBS 9.2.1R to 9.2.3R.7(2) When a firm is making a personal recommendation for a retail client who is, or is eligible to be, a member of a pension scheme with safeguarded benefits and who is considering whether to transfer, convert or opt-out, a firm should start by assuming that a transfer, conversion or opt-out will not be suitable.7(3) A firm should only consider a transfer, conversion or opt-out
If a firm provides a suitability report to a retail client in accordance with COBS 9.4.2AR10 it should include:7(1) a summary of the advantages and disadvantages of its personal recommendation;(2) an analysis of the financial implications (if the recommendation is to opt-out); 7(2A) a summary of the key outcomes from the appropriate pension transfer analysis10 (if the recommendation is to transfer or convert); and7(3) a summary of any other material information.
(1) 9Where a firm has advised a retail client in relation to a pension transfer or pension conversion and the firm is asked to confirm this for the purposes of section 48 of the Pension Schemes Act 2015, then the firm should provide such confirmation as soon as reasonably practicable.(2) 9The firm should provide the confirmation regardless of whether it advised the client to proceed with a pension transfer or pension conversion or not. 57
4In this section:(1) 'fact sheet' means the MoneyHelper7 fact sheet 5or a statement provided by a firm that gives materially the same information;(1A) 'MoneyHelper7 fact sheet’ means the guide “Your pension: it's time to choose”, available on https://www.moneyhelper.org.uk7;5(2) 'intended retirement date' means:(a) the date (according to the most recent recorded information available to the provider) when the scheme member intends to retire, or to bring the benefits in the scheme
4This section specifies the circumstances where a firm must:(1) provide a retail client with an open market options statement;(2) signpost pensions guidance;(3) provide information to enable a retail client to make an informed decision about how to access their pension savings;5(4) remind a retail client about their open market options; and5(5) provide appropriate warnings about the risks generally associated with the retail client’s options for accessing their pension savings.
4For the purpose of COBS 19.4.6AR(2)(b)5 where a firm provides its own statement as the fact sheet, it should include materially the same information in the MoneyHelper7 fact sheet about:(1) the following options for accessing pensions savings, even if they are not offered by the firm:(a) pension annuity;(b) drawdown pension; and(c) uncrystallised funds pension lump sum payments;(2) the main features, benefits and risk factors relevant to the options for accessing pensions savings,
4At least six weeks before the retail client’s intended retirement date the firm must:(1) remind the client about the open market options statement;(2) tell the client what sum of money will be available to exercise open market options;(3) provide the client with a clear and prominent statement recommending that the client uses the pensions guidance and that appointments are available;5 and(4) recommend that the client seeks appropriate guidance or advice to understand their options
4A firm must not provide a key features illustration to a retail client for a pension decumulation product, excluding a small lump sum payment, unless:(1) it is required to provide the client with the key features illustration in accordance with the rules on providing product information to clients (COBS 14.2.1R); (2) without prompting by the firm, the client requests the key features illustration; (3) it includes a key features illustration for each of the pension decumulation
4For the purpose of COBS 19.4.12R, examples of the circumstances which can affect retirement income calculations and payments include:(1) the client’s marital status; (2) whether the client has dependants;(3) whether the pension annuity provides a fixed, increasing or decreasing income; (4) the certainty of income associated with an annuity; (5) the client’s state of health; and(6) the client’s lifestyle choices.
4When a firm communicates with a retail client about their drawdown pension and uncrystallised funds pension lump sum options, the firm must provide the client with such information as is necessary for the client to make an informed decision including, where relevant, information about:(1) how the remaining fund is invested; (2) sustainability of income over time including; (a) the extent to which any income is guaranteed; and(b) implications of full encashment on the client’s
4A firm should ensure that when it makes any communication with a retail client concerned with the client’s options to access their pension savings it has regard to the fair, clear and not misleading rule, the client’s best interests rule and Principles 6 and 7. In particular a firm5 should:(1) refer to the contents of the MoneyHelper7 fact sheet to identify what information might assist the client to understand their options;(2) consider whether it needs to include or refer to
(1) 4When a firm communicates with a retail client about the retail client'spersonal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract which is provided by the firm, unless the circumstances in (2) apply, the firm must:(a) refer to the availability of the pensions guidance;(b) offer to provide the client with information about how to access the pensions guidance; and(c) include a recommendation that the client seeks appropriate
4An example of behaviour by or on behalf of a firm that is likely to contravene the client's best interests rule or Principle 6 and may contravene other Principles is for a firm to actively discourage a retail client from using the pensions guidance, for example by:(1) leading the client to believe that using the pensions guidance is unnecessary or would not be beneficial; or(2) obscuring the statement about the availability of the pensions guidance or any other information relevant
1A firm that sells, or (where relevant) gives effect to22:(1) a non-PRIIP packaged product17 to a retail client, must provide a key features document and a key features illustration2 to that client (unless the packaged product is a unit in a regulated collective investment scheme17);777(2) a life policy to a client, must provide:20131313(a) the Solvency II Directive information to that client;20(b) a client with objective and relevant information about the policy:20(i) in a comprehensible
(1) 7This rule applies to:17(a) an authorised fund manager of a UCITS scheme or a KII-compliant NURS that is either an authorised unit trust, authorised contractual scheme or an ICVC; and17(b) an ICVC that is a UCITS scheme or KII-compliant NURS.1712(2) An authorised fund manager and an ICVC in (1) that sells units in a UCITS scheme or a KII-compliant NURS17 directly, or through another natural or legal person who acts on its behalf and under its full and unconditional responsibility,
(1) A firm that personally recommends that a retail client holds a particular asset in a SIPP must provide that client with sufficient information for the client to be able to make an informed decision about whether to buy or invest.(2) This rule does not apply if the asset is described in COBS 14.2.1 R.
A firm is not required to provide a key features document or a key features illustration2for: (1) [deleted]17(2) a life policy if:13(a) [deleted]21(b) the client is habitually resident outside the United Kingdom and the sale is not by distance contract.(3) a traded life policy; or17(4) an interest in an investment trust savings scheme.17[Note: in respect of (2), articles 4(1) and 16 of the Distance Marketing Directive and article 185 of the Solvency II Directive13]13
A firm is not required to provide a key features document or a key features illustration2, if:(1) the client is buying or investing in response to a direct offer financial promotion without receiving a personal recommendation to buy or invest; and(2) the firm provides materially the same information in some other way.
A firm is not required to provide a key features document or17 a key features illustration17 if:2(1) the client is habitually resident outside the United Kingdom21 and not present in the United Kingdom21 when the relevant application is signed; or(2) the purchase is by a discretionary investment manager on behalf of a retail client; or(3) the sale is arranged or personally recommended by an investment manager and the client has agreed that a key features document is not required.17(4)
7For the purposes of the provision rules in relation to a key investor information document or a NURS-KII document17, a firm: (1) may satisfy the requirement to provide the document to the investor by providing it to a person who has written authority to make investment decisions on that investor’s behalf; and(2) is not required to consider as a new transaction:(a) a subscription to units in a UCITS scheme,17 an EEA UCITS scheme or a KII-compliant NURS17 in which the client already
7(1) [deleted]177(2) The FCA would regard a decision to subscribe to a regular monthly savings plan as a single investment decision for the purpose of COBS 14.2.9AR (2)(a). However, a subsequent decision by the client to increase the amount of the regular contributions to be invested in units of a particular scheme or to direct the contributions to a different scheme, would in each case constitute a new transaction.7
If there is no initial service agreement but the successive operations or separate operations of the same nature performed over time are performed between the same contractual parties, the rules in this section only apply:(1) when the first operation is performed; and(2) if no operation of the same nature is performed for more than a year, when the next operation is performed (the next operation being deemed to be the first in a new series of operations).
When the rules in this section require a firm to:(1) [deleted]177(2) provide a key features document17 or any other document or information to a client, the document or information must be provided free of charge and in good time before the firm carries on the relevant business; or77(3) provide a key investor information document,17EEA key investor information document or NURS-KII document17 to a client, it must be provided in good time before the client's proposed subscription
7(1) A firm may provide a document, or the information required to be provided by the rules in this section, in a durable medium immediately after the conclusion of a distance contract, if the contract has been concluded at a client's request using a means of distance communication that does not enable the document or information to be provided in that form in good time before the client is bound by the contract.7(2) The exception in (1) does not apply in relation to the provision
7(1) Where the rules in this section require a document or information to be provided, in the case of a voice telephony communication, a firm must:77(a) if the client gives explicit consent to receiving only limited information, provide the abbreviated distance marketing disclosure information () orally to the client;7(b) if the client does not give explicit consent to only receiving limited information, and the parties wish to proceed by voice telephony communication, provide
(1) 1This section applies to:24(a) a firm which is a retail investment product provider; 114(b) in relation to COBS 6.1B.9 R, COBS 6.1B.10 G and COBS 6.1B.11 G, a platform service provider; 11and4(c) 11a firm which is an operator of an electronic system in relation to lending; in circumstances where a retail client receives a personal recommendation in relation to a retail investment product or P2P agreement11 and also where a retail investment product transaction is executed
This section applies to a firm when it makes a personal recommendation on a retail investment product or P2P agreement11and where a retail investment product for which it is the retail investment product provider or P2P agreement which it facilitates as the operator of an electronic system in relation to lending11is the subject of a personal recommendation made by another firm.
5(1) 12Except as specified in COBS 6.1B.5AR, a firm must not offer or pay (and must ensure that none of its associates offers or pays) any commissions, remuneration or benefit of any kind to another firm, or to any other third party for the benefit of that firm, in connection with that firm’sbusiness of advising13 (or any related services), except those that facilitate the payment of adviser charges from a retail client’s investments in accordance with this section.(2) Paragraph
5A firm and its associates may:(1) offer and pay a commission, remuneration or benefit of any kind in the circumstances set out in COBS 6.1B.5 R if:(a) the personal recommendation was made on or before 30 December 2012;(b) the offer and payment was permitted by the rules in force on 30 December 2012;(c) the contract under which the right to receive the commission, remuneration or benefit of any kind was entered into on or before 30 December 2012; (d) the terms of that contract
8A firm may continue paying commission, remuneration or benefits of any kind to another firm in relation to a personal recommendation made by that other firm in circumstances where that other firm may accept that commission, remuneration or benefit of any kind (see COBS 6.1A.4A R and COBS 6.1A.4AA G).
A firm must:(1) take reasonable steps to ensure that its retail investment product charges or its charges as an operator of an electronic system in relation to lending11are not structured so that they could mislead or conceal from a retail client the distinction between those charges and any adviser charges payable in respect of its retail investment products or investments in P2P agreements made through the system of which it is the operator of an electronic system in relation
10A retail investment product provider may maintain retail investment product charges at a level such that a cash rebate is payable to the retail client if:(1) the retail investment product transaction was agreed on or before 5 April 2014 and executed within a reasonable time of that agreement; and (2) the retail client's right to receive the cash rebate arose on or before 5 April 2014; and(3) on or after 6 April 2014 no change is made to that product, or, where there is such
10The following examples do not entail changes to the retail investment product: (1) no change is made to the retail client's investment in the relevant product or to the level of the retail client's regular contributions into that product;(2) the retail client's investment in, or regular contribution to, the relevant product is reduced: the retail investment product provider may continue to pay the cash rebate associated with the reduced investment amount;(3) the retail client's
COBS 6.1B.7 R does not prevent a firm from offering a promotional discount to a retail client in the form of extra units or additional investment, but a9firm that offers to facilitate, directly or through a third party, the payment of adviser charges, including6 by means of a platform service must:49(1) obtain and validate instructions from a retail client in relation to an adviser charge;(2) offer sufficient flexibility in terms of the adviser charges it facilitates; and(3) not
6A firm may facilitate the payment of adviser charges for the purposes of COBS 6.1B.9 R by:(1) selling all or part of the retail client'sretail investment product to pay the adviser charge; or(2) disposing of or reducing all or part of the retail client's rights under the retail investment product (for example, by way of a part disposal which creates benefits under a life policy) to pay the adviser charge; or(3) separating out an amount or amounts for the payment of the adviser
COBS 6.1B.9R(3) does not prevent a firm, if this is in the retail client's best interests, from entering into an agreement with another firm which is providing a personal recommendation to a retail client, or with a retail client of such a firm, to provide it with credit separately in accordance with the rules and guidance13 on providing credit and other benefits to firms that provide personal recommendations13 on retail investment products or P2P agreements11(see13COBS 2.3.12
For the purposes of calculating any with-profits funds surplus and the rules and guidance in COBS 20, including COBS 20.1A.5 R, COBS 20.1A.6 R and COBS 20.2.17C R, a firm must include the following non-exhaustive list as ‘other liabilities’: (1) liabilities arising from its regulatory duty to treat customers fairly (where not already included in technical provisions); and(2) the value of any prospective future transfers out of the with-profits fund properly attributable to shareholders
(1) Where the firm:(a) identifies particular assets as forming a distinct part of its with-profits fund; and(b) restricts participation in the profits or other experience of that distinct part of the fund to a particular category of with-profits policies; then, provided that:(c) such identification and restriction is consistent with the considerations in (3), and(d) the firm treats each affected category of with-profits policyholder fairly, having regard to those considerations;each
(1) For a Solvency II firm operating a with-profits fund prior to 1 January 2016:(a) assets in the with-profits fund held in accordance with INSPRU on 31 December 2015 are deemed to be items in a with-profits fund for the purposes of COBS 20 from 1 January 2016, provided that any transfers out of, and any outgoings from, the fund up to 31 December 2015 were made in accordance with, and/or do not as at 31 December 2015, constitute, or continue to constitute, a breach of INSPRU
A Solvency II firm must ensure that it holds assets in each of its with-profits funds of a value at least sufficient to cover the "with-profits policy liabilities" defined in the PRA Rulebook: Glossary and as required by PRA Rulebook: Solvency II firms: With Profits rule 2.1, and any other liabilities in respect of all of the business written in, or transferred into, that with-profits fund.
A Solvency II firm must maintain separate accounting records for each of its with-profits funds. The accounting records must identify:(1) all of the assets of that with-profits fund;(2) the best estimate component of technical provisions for the with-profits policies written in, or transferred into, that with-profits fund;(3) the best estimate component of technical provisions for the non-profit insurance contracts written in, or transferred into, that with-profits fund;(4) any
A Solvency II firm must ensure that the assets in its with-profits funds are separately identified and allocated to the relevant with-profits fund at all times. Assets in external accounts (e.g. with banks, custodians, or brokers) should be segregated in the firm's books and records into separate accounts for with-profits insurance business and other business. Where a firm has more than one with-profits fund, separate accounting records must be maintained for each fund. Accounting
A Solvency II firm must not transfer assets out of a with-profits fund unless:(1) the assets represent any part of a with-profits fund surplus, or represent assets held in accordance with COBS 20.1A.5 R in relation to the part of a distribution that has been made which is properly attributable to shareholders, in accordance with COBS 20; and(2) no more than three months have passed since the actuarial investigation determining that surplus.
For the purposes of COBS 20.1A.8 R, an actuarial investigation is required to determine any with-profits fund surplus for the requirements in COBS 20 and remains in-date for three months from the date when the determination of the surplus was made. However, even where the investigation is still in-date, the firm should not make the transfer unless there is sufficient surplus at the time of the transfer to cover the value of the assets being transferred. The actuarial investigation
References in COBS 20.1A.10 R and COBS 20.1A.11 R to ‘the purposes of the business’ in the with-profits fund include the payment of claims, expenses and liabilities arising from that business, the acquisition of lawful access to fixed assets to be used in that business and the investment of assets. The payment of liabilities may include repaying a loan but only where that loan was incurred for the purpose of the business written into the with-profits fund. The purchase or investment
A firm, other than a non-directive friendly society,2 which is subject to contractual terms providing for payments under a capital instrument included in that insurer's own funds2, must:(1) manage any with-profits fund so that discretionary benefits under a with-profits policy are calculated and paid, disregarding, insofar as is necessary for its customers to be treated fairly, any requirements in such contractual terms whether or not they are absolute, contingent or at the discretion
(1) A firm, other than a non-directive friendly society,2 is expected to manage its with-profits fund so that amounts (whether interest, principal, or other outgoings) payable by the firm under a capital instrument included in that insurer's own funds2 (as determined in accordance with the PRA Rulebook: Solvency II Firms: Own Funds or Non-Solvency II firms: Insurance Company – Capital Resources2) do not impact on the with-profits fund's assets or on the firm's ability to declare
A Solvency II firm must ensure that it has adequate arrangements in place for ensuring that transactions affecting the assets of the firm operate fairly between with-profits policyholders and other persons interested in the other assets of the insurer and, where the firm has more than one with-profits fund, those transactions operate fairly between the with-profits policyholders in each of those funds.
1This chapter applies to a firm:(1) communicating with a client in relation to its designated investment business (other than MiFID, equivalent third country or optional exemption business)10;(1A) 10communicating with a client in relation to its MiFID, equivalent third country or optional exemption business;(2) communicating or approving a financial promotion other than:(a) a financial promotion of qualifying credit, a home purchase plan or a home reversion plan; or(b) a financial
(1) 4This chapter applies in relation to an authorised professional firm in accordance with COBS 18 (Specialist regimes).(2) This chapter applies, to a limited extent, in relation to communicating or approving a financial promotion that relates to a deposit if the deposit is a structured deposit, cash deposit ISA or cash deposit CTF.
A firm is required to comply with the financial promotion rules in relation to a financial promotioncommunicated by its appointed representative even where the financial promotion does not require approval because of the exemption in article 16 of the Financial Promotion Order (Exempt persons).[Note: see section 39 of the Act]
(1) In COBS 4.3.1 R,9 the defined term9 "financial promotion" includes:1199(a) in relation to MiFID, equivalent third country or optional exemption business, all communications that are marketing communications within the meaning of MiFID; and11(b) in relation to insurance distribution, all communications that are marketing communications within the meaning of IDD.11(2) In the case of MiFID, equivalent third country or optional exemption business9, certain requirements in this
Approving a financial promotion without communicating it (which includes causing it to be communicated)3 is not MiFID, equivalent third country or optional exemption business9. Communicating a financial promotion to a person, such as a corporate finance contact or a venture capital contact, who is not a client within the meaning of COBS 3.2.1 R (1), COBS 3.2.1 R (2) or COBS 3.2.1 R (4) in respect of the MiFID, equivalent third country or optional exemption business9 to which
A reference in this chapter to MiFID, equivalent third country or optional exemption business9 includes a reference to communications that occur before an agreement to perform services in relation to MiFID, equivalent third country or optional exemption business9.[Note: see recital 169 to the MiFID Org Regulation9]
(1) In relation to communications by a firm to a client in relation to its designated investment business this chapter applies in accordance with the general application rule and the rule on business with UKclients from an overseas establishment (COBS 1 Annex 1 Part 2 paragraph 2.1R).(2) In addition, the financial promotion rules apply to a firm in relation to:(a) the communication of a financial promotion to a person inside the United Kingdom;(b) the communication of a cold call
Firms should note the territorial scope of this chapter is also affected by:(1) the disapplication for financial promotions originating outside the United Kingdom that are not capable of having an effect within the United Kingdom (section 21(3) of the Act (Restrictions on financial promotion)) (see the defined term “excluded communication”);(2) the exemptions for overseas communicators (see the defined term “excluded communication”); and(3) the rules on financial promotions with