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COB 6.4 Product disclosure: special situations

Application

COB 6.4.2 G

Firms are reminded that, under COB 6.2.2 R, the key features required to be provided to a private customer under COB 6.4 must be provided by the firm in a durable medium. See also COB 6.2.3 G - COB 6.2.5 G.1 For simplified prospectus schemes, firms are referred to COB 6.2.26 R to COB 6.2.45 R for the applicable provisions in relation to simplified prospectuses.5

Occupational pension schemes

COB 6.4.3 G

COB 6.1 (Packaged product and ISA disclosure) and COB 6.2 (Provision of key features or simplified prospectus5) apply to a firm in respect of the purchase of packaged products, whether life policies or schemes, by the trustees of money-purchase occupational schemes. There is no requirement for a firm to provide key features for packaged products sold to trustees of defined benefit pension schemes.

COB 6.4.4 R
  1. (1)

    When a firm sells, personally recommends or arranges the sale of a new group or master life policy, the first in a series of individual life policies or the first units in a particular key features scheme5 or simplified prospectus scheme5 to or for the trustees of a money-purchase occupational scheme, it must provide the trustees with key features, in accordance with COB 6.2.7 R to COB 6.2.25 R or for a simplified prospectus scheme, with a simplified prospectus, in accordance with COB 6.2.26 R to COB 6.2.45 R5.

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  2. (2)

    In COB 6.2 to COB 6.5, for the purposes of (1), the firm must treat the trustees as private customers.

  3. (3)

    In addition to the information to be provided to trustees under COB 6.4.4 R (1), the firm must ensure that key features or the simplified prospectus5 are made available to the trustees to distribute to all scheme members at the outset of the scheme and for subsequent new members.

  4. (4)

    The requirement in COB 6.4.4 R (3) applies to main scheme benefits and to additional voluntary contributions where members' benefits are linked to earmarked segments of life policies or schemes. It does not apply where trustees make pooled investments and make their own arrangements for allocation of investment returns to determine members' benefits, whether attached to defined benefit pension schemes or money purchase occupational scheme.

COB 6.4.5 G
  1. (1)

    The illustrative figures within the key features provided under COB 6.4.4 R (1) can be on an example basis, using a range of representative actual or hypothetical scheme members (covering, for example, different ages, sexes and salaries), so that the trustees can assess the effectiveness of the investment for their pension scheme members.

  2. (2)

    The definition of money-purchase occupational scheme includes executive pension plans (established for directors, executives and senior employees), small self-administered schemes that provide money-purchase benefits and additional voluntary contribution schemes.

  3. (3)

    Group personal pension schemes are not occupational pension schemes and COB 6.4.4 R does not apply to them. Firms should therefore provide each person who is offered membership of a group personal pension scheme with key features or a simplified prospectus5 in accordance with COB 6.1 and COB 6.2. This does not preclude generic key features being sent out as part of a financial promotion, provided that a post-sale confirmation is issued in accordance with COB 6.3.3 R.

  4. (4)

    The objective of COB 6.4.4 R (3) is to ensure that prospective scheme members have access to information about the occupational pension scheme that could enable comparison with alternative personal investments. Firms may decide for themselves the format (but not content) of this information. For example, individual sets of key features can be supplied or a schedule of details which the trustees or their advisers can assimilate into other pension scheme communications.

SIPPs, personal pension deposits and personal pension products8

COB 6.4.5A R

8When a firm sells, manages, personally recommends or arranges the sale of a SIPP, personal pension deposit or personal pension product (not the assets within them) to or for a private customer, the firm must, unless COB 6.4.27 R to COB 6.4.31A R apply, provide the private customer with:

  1. (1)

    sufficient information about the relevant scheme for the private customer to be able to make an informed decision before that customer completes an application for that scheme; and

  2. (2)

    (in respect of a distance contract with a retail customer) the relevant contractual terms and conditions and the information set out in COB App 1,

in a durable medium in good time before the customer is bound by the transaction.

COB 6.4.5B G

8The sufficient information provided should include the range and depth of information normally found in key features.

COB 6.4.5C R

8 COB 6.4.5A R does not apply to a scheme operator when its scheme is sold on the personal recommendation of, or arranged to be sold by, another person, provided that other person:

  1. (1)

    is a firm (or an appointed representative) operating from an establishment maintained by the firm (or appointed representative) in the United Kingdom; or

  2. (2)

    is operating from an establishment in an EEA State whose law imposes an obligation on the person to provide information about the scheme in accordance with articles 3 and 5(1) and (2) of the Distance Marketing Directive.

Assets to be held within a SIPP8

COB 6.4.5D R

8Where a firm makes a personal recommendation to a private customer about the purchase of an asset to be held within a SIPP, the firm must, unless COB 6.4.27 R to COB 6.4.31A R applies, provide the private customer with:

  1. (1)

    sufficient information about that asset, and the risks and advantages of the proposed asset purchase, for the customer to be able to make an informed decision about the asset purchase before it takes place; and

  2. (2)

    in respect of a distance contract with a retail customer) the relevant contractual terms and conditions and the information set out in COB App 1;

in a durable medium in good time before the customer is bound by the transaction.

COB 6.4.5E G

8If this chapter requires a particular type of product disclosure for a particular type of asset, the product disclosure provided in accordance with those rules is sufficient information for this purpose.

8Sales of life policies (etc.) to operators of personal pension schemes8

COB 6.4.6 R
  1. (1)

    A firm which sells, personally recommends or arranges the sale of a new group or master life policy, the first in a series of individual life policies or the first units in a particular key features scheme or 8simplified prospectus scheme5 to the operator of a personal pension scheme, must provide the operator of that scheme with key features (in accordance with COB 6.2.7 R to COB 6.2.25 R) or a simplified prospectus (in accordance with COB 6.2.26 R to COB 6.2.45 R5), as the case may be8.

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  2. (2)

    In COB 6.2 to COB 6.5, for the purposes of (1), members, prospective members and trustees must be treated by the firm as private customers.

COB 6.4.6A G

8The illustrative figures included in the key features or simplified prospectus can be on an example basis, using a range of representative actual or hypothetical scheme members (covering, for example, different ages, sexes and salaries), provided the illustrative figures and the range of representative scheme members are sufficient for the operator to be able to assess the effectiveness of the relevant investment for scheme members.

COB 6.4.7 G

8[deleted]

Income withdrawals and short-term annuities7

COB 6.4.8 R

Except in relation to a SIPP, personal pension deposit or personal pension product, when8 a firm personally recommends, arranges or effects income withdrawals or the purchase of a short-term annuity8 to or for a private customer, the customer must be provided with key features or a simplified prospectus5 in good time before he signs any form of application or authority electing to make those withdrawals or purchases7, whether that election 7or purchase is made with advice on investments or on an execution-only basis, unless COB 6.4.10 R to COB 6.4.12 R or COB 6.4.27 R to COB 6.4.31 R (telephone sales and other exemptions) applies.13

8 7 8
COB 6.4.8A R

8When a firmpersonally recommends, arranges or effects an income withdrawal from a SIPP, personal pension deposit or personal pension product to or for a private customer, it must provide that customer with:

  1. (1)

    sufficient information about the income withdrawal for the customer to be able to make an informed decision; and

  2. (2)

    (in respect of a distance contract with a retail customer), the relevant contractual terms and conditions and the information set out in COB App 1,

in a durable medium in good time before the customer is bound by the transaction.

COB 6.4.8B G

8The sufficient information provided should include the range and depth of information normally found in key features.

COB 6.4.9 R

In relation to an election to make income withdrawals, or short-term annuities,7 the requirement for the provision of key features or a simplified prospectus5 in:

  1. (1)

    COB 6.2.7 R also applies when an existing life policy is to be endorsed;

  2. (2)

    COB 6.2.22 R or, for simplified prospectus schemes, COB 6.2.33 R also applies when an existing scheme holding is to be used.

COB 6.4.10 R

In relation to an election to make income withdrawals, or purchase of short-term annuities,7 the requirements of COB 6.4.11 R and COB 6.4.12 R override the relevant requirement in COB 6.2 (Provision of key features or simplified prospectus5), where there is conflict, but only where this would not contravene a requirement of the UCITS Directive5.

COB 6.4.11 R

When a private customer makes a series of elections within a period of 12 months to make income withdrawals,7 or purchase of short-term annuities, the firm that is personally recommending, arranging or effecting the elections may provide a 8combined set, or separate sets,8 of key features, simplified prospectuses5 or equivalent information8 for those elections (as appropriate)8.

8 8 5 5 5
COB 6.4.12 R

Where income is being taken, no less than six weeks before the end of the annuity period for a short-term annuity or at intervals no longer than 12 months from the date of an election by a private customer to make income withdrawals the product provider of the unvested pension scheme must:7

7
  1. (1)

    provide the private customer with such information required by COB 6.6.13 R as will enable the private customer to review the options available7; and

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  2. (2)

    inform the private customer how to obtain advice on investments in respect of his unsecured or alternatively secured pension7, and that it would be in his best interests to do so.

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Cash deposit ISAs and cash deposit CTFs4

COB 6.4.13 R

When a firm manages, personally recommends or sells a cash deposit ISA or cash deposit CTF to a private customer, that customer must be provided with the information specified in whichever of COB 6.5.42 R or COB 6.5.42A R applies to it in good time before the customer is bound by the transaction, unless COB 6.4.27 R to COB 6.4.31 R (telephone sales and other exemptions) applies.134

Traded life policies

COB 6.4.14 R

When a firm personally recommends that a private customer should purchase a traded life policy, the customer need not be provided with key features, if the firm instead supplies the information in COB 6.5.44 R in good time before the customer is asked to complete any form of application or authority giving effect to the purchase of the traded life policy.1

Stakeholder pension schemes

COB 6.4.15 R

When a firm sells, manages, personally recommends or arranges the sale of a stakeholder pension scheme to or for a private customer, the firm must, subject to COB 6.4.18 R and unless COB 6.4.27 R to 6COB 6.4.31A R6 (telephone sales and other exemptions) applies, provide the private customer with key features or a simplified prospectus5 before the private customer completes an application for the stakeholder pension scheme.3

COB 6.4.16 R

When a firm proposes to deal with a private customer on the telephone for the purposes of providing information through a decision tree about stakeholder pension schemes, the firm may do so only if it has adequate evidence to show that the private customer has access to a copy of a decision tree (as specified in COB 6.5.8 R) during the conversation.

COB 6.4.17 G

COB 6.4.16 R is intended to ensure that, where a firm takes a private customer through the decision tree process by telephone, it takes reasonable care to ensure that the private customer has a decision tree in front of him. For example, on first contact firms could enquire whether the private customer has a decision tree, and if not, send one to him before taking him through the decision tree process during a follow-up telephone call.

COB 6.4.18 R

COB 6.4.15 R does not apply to a stakeholder pension scheme operator when its stakeholder pension scheme is sold on the personal recommendation of, or arranged to be sold by, another person, provided that other person:1

  1. (1)

    is a firm (or an appointed representative) operating from an establishment maintained by the firm (or appointed representative) in the United Kingdom; or1

  2. (2)

    is operating from an establishment in an EEA State whose law imposes an obligation on the person to provide information about the stakeholder pension scheme in accordance with articles 3 and 5(1) and (2) of the Distance Marketing Directive.1

COB 6.4.19 R
  1. (1)

    When a firm sells, personally recommends or arranges the sale of a new group or master life policy, the first in a series of individual life policies or the first units in a particular key features scheme5 or simplified prospectus scheme5 to the trustees or the operator of a stakeholder pension scheme, it must provide the trustees or operator with key features, in accordance with COB 6.2.7 R to COB 6.2.25 R or for a simplified prospectus scheme, with a simplified prospectus, in accordance with COB 6.2.26 R to COB 6.2.45 R5.

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  2. (2)

    In COB 6.2 to COB 6.5, for the purposes of (1), the firm must treat trustees and operators as private customers.1

COB 6.4.20 G

The illustrative figures within the key features provided under COB 6.4.19 R can be on an example basis, using a range of representative actual or hypothetical scheme members (covering, for example, different ages, sexes and salaries), so that the trustees or operator can assess the effectiveness of the investment for scheme members.

COB 6.4.21 R

When a firm provides a private customer with information through a decision tree concerning membership of a stakeholder pension scheme, but does not give advice on investments or make a personal recommendation, the firm must provide the private customer with a written notice in accordance with COB 6.4.22 R and COB 6.4.23 R.

COB 6.4.22 R

A written notice required by COB 6.4.21 R must be provided by the firm no later than 8 business days after the cancellation period commences.1

COB 6.4.23 R

The notice in COB 6.4.22 R must:

  1. (1)

    confirm that no advice on investment has been given and that the private customer has decided that the stakeholder pension scheme is appropriate as a result of the answers he has given to the questions posed in the decision tree; and

  2. (2)

    include a copy of the decision tree indicating the answers which the private customer has given.

COB 6.4.24 G

After giving information through a decision tree in accordance with COB 6.4.16 R and before the customer completes the application, a firm could satisfy COB 6.4.15 R by providing an adequate oral explanation (for example over the telephone in the case of a call-centre) about the main features of the stakeholder pension scheme (as outlined in COB 6.2.11 G). Written key features must then be given or sent along with the copy decision tree in accordance with COB 6.4.21 R -COB 6.4.23 R within five business days.

8Entering into a distance contract for accepting deposits (other than a cash deposit ISA or a personal pension deposit)8

COB 6.4.25 R
  1. (1)

    1A retail customer must be provided with all the contractual terms and conditions and the information in COB App 1 in a durable medium in good time before he is bound by a distance contract or offer under which the firm will accept deposits (other than a cash deposit ISA (for which see COB 6.5.42 R) or a personal pension deposit (for which see COB 6.4.5A R))8, unless an exemption in COB 6.4.27 R to COB 6.4.31 R (telephone sales and other exemptions) applies.3

COB 6.4.26 G

1[deleted]3

3Exemption: telephone sales

COB 6.4.27 R
  1. (1)

    1Where this chapter requires key features, a simplified prospectus5 or other information to be provided, in the case of voice telephony communications, a firm:

    1. (a)

      must provide the customer at the beginning of the telephone conversation with the name of the firm and (if the call is initiated by the firm) the commercial purpose of the call;4

    2. (b)

      provided the customer gives his explicit consent to receiving only limited information, may proceed on the basis of at least the following information:3

      1. (i)

        the name of the person in contact with the customer and his link with the firm;

      2. (ii)

        a description of the main characteristics of the service;

      3. (iii)

        the total price to be paid by the customer to the firm for the service, including all related fees, charges and expenses, and all taxes paid through the firm together with a statement, where relevant, that commission or remuneration will be paid to the adviser or representative, or, where an exact price cannot be indicated, the basis for the calculation of the price enabling the customer to verify it;

      4. (iv)

        where relevant, notice of the possibility that other taxes or costs may exist that are not paid through the firm or imposed by it;

      5. (v)

        the existence or absence of a right to cancel the service under COB 6.7 and, where there is such a right, its duration and the conditions for exercising it, including information on the amount which the customer may be required to pay if the contract is terminated early or unilaterally under its terms, as well as the consequences of not exercising it; and

      6. (vi)

        that other information is available on request, and the nature of that information, and4

      7. (vii)

        in addition to (a) and (b) above, where the product is a CTF, provided the customer gives his explicit consent to receiving only limited information, may proceed on the basis of the information referred to in COB 6.5.40 R (7) given orally.4

  2. (2)

    If the customer does not give his explicit consent to receiving limited information, and the parties wish to proceed by telephone, the firm must prior to the conclusion of the contract provide all of the information required by COB App 1 orally to the customer.3

  3. (3)

    In the case of either (1) or (2), the firm must send the private customer immediately after the contract is concluded, the required key features, simplified prospectus5 or other information (as applicable) in a durable medium.

COB 6.4.28 G

1Firms are reminded of the requirements in COB 3.8.21 G (Real time financial promotions) and COB 3.10 (Unsolicited real time financial promotions) in relation to telephone calls that may fall within the definition of a financial promotion. Firms are also reminded that in relation to a stakeholder pension schemeCOB 6.4.16 R continues to apply.3

3Exemption: certain other means of distance communication

COB 6.4.29 R

3This exemption applies where this chapter requires a key features, simplified prospectus5 or other information to be provided in relation to a distance contract, if the distance contract is concluded at the customer's request using a means of distance communication (other than telephone) which does not enable provision of the information in a durable medium before the customer is bound by the contract or offer. In that case, the firm must provide key features, simplified prospectus5 or other information to the customer in a durable medium immediately after the conclusion of the contract.2

3Exemption: successive or separate operations under an initial service agreement

COB 6.4.30 R

This exemption applies where this chapter requires a key features, simplified prospectus5 or other information to be provided in relation to a distance contract, if the firm has an initial service agreement with the customer and the contract is in relation to a successive operation or a separate operation of the same nature under that agreement (see COB 1.10.2 G (1)).2

3Exemption: other successive and separate operations

COB 6.4.31 R

3This exemption applies where this chapter requires a key features, simplified prospectus5 or other information to be provided in relation to a distance contract, if:

  1. (1)

    the firm has no initial service agreement with the customer:

  2. (2)

    the firm has performed an operation for the customer within the last year: and

  3. (3)

    the contract is in relation to a successive operation or separate operation of the same nature (see COB 1.10.2 G (2)).

6Exemption: automatic enrolment of employees in pension schemes

COB 6.4.31A R

6This exemption applies where a private customer is automatically enrolled by his employer in a stakeholder pension scheme or personal pension scheme8 provided through the workplace. In that case, in good time before the private customer is bound by the contract or offer, he must be provided with the appropriate key features or other information.

8
COB 6.4.32 R

2At each anniversary of the date on which a long-term care insurance contract which is based on single premium investment bonds was entered into, the insurer must:

  1. (1)

    provide the private customer with a table based on the format of COB 6.5.24 containing at least the current fund value and projected future policy values (as in column "What you might get back");

  2. (2)

    where it is the case, inform the private customer of the possibility that future policy values may be insufficient to fulfil the original purpose of the contract; and

  3. (3)

    inform the private customer how to obtain advice on investments in respect of long-term care insurance contracts, and that it is in his best interest to do so.

COB 6.4.33 G

2In the case of a long-term care insurance contract in which:

  1. (1)

    long-term care benefits are available after commencement of the policy at the option of the policyholder; and

  2. (2)

    as a result of the exercise of that option a new contract of insurance is offered to the policyholder;

provision is made in TC 2.5.5A R so that, in respect of the contract containing the option, an employee, although engaged in advising on long-term care insurance contracts need not be required to pass an appropriate examination for long-term care insurance contracts to do so.

4Exemption: Revenue allocated accounts

COB 6.4.34 R

4When a firm opens a Revenue allocated CTF, the firm must send the private customer on the first available opportunity after the account has been opened, whichever of the key features or other information is required in a durable medium.

COB 6.4.35 G

4In considering what the first available opportunity mentioned in COB 6.4.34 R is, firms may take into account that there may generally be a delay between a Revenue allocated CTF being opened and the customer being informed that it had been opened.