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COBS 6.3 Disclosing information about services, fees and commission – packaged products

Application

COBS 6.3.1RRP

1This section applies to a firm which makes a personal recommendation to, deals in investments as agent for, or arranges for, a retail client in relation to a packaged product.

COBS 6.3.2RRP

This section does not apply to a firm giving basic advice where the firm follows the basic advice rules in COBS 9.6.

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Disclosure to retail clients in good time

COBS 6.3.3GRP
  1. (1)

    The rules referred to in (4) are derived from the Single Market directives and the Distance Marketing Directive. In the FSA's opinion, a firm may3 comply with them by ensuring3 that in good time before:

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    1. (a)

      a retail client is bound by an agreement for the provision of a personal recommendation on packaged products; or

    2. (b)

      the firm performs an act preparatory to the provision of a personal recommendation;

    3. (c)

      (3in relation to the amendment of a life policy for that retail client)3 it gives a personal recommendation in relation to packaged products;

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    its representative provides the client with a services and costs disclosure document 3 or combined initial disclosure document.3

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  2. (2)

    A firm should consider the extent to which it is appropriate to provide a services and costs disclosure document 3or a combined initial disclosure document 3if the appropriate information has been given to the client on a previous occasion and the information is still accurate and appropriate for the client.

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  3. (3)

    A firm should provide the information required by this section in a durable medium.

  4. (4)

    For the purposes of (1), provision of a services and costs disclosure document or combined initial disclosure document 3 will comply with:

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    1. (a)

      the elements of the rule on summary disclosure of fees, commissions and non-monetary benefits (COBS 2.3.1R (2)(b), as qualified by COBS 2.3.2 R) that relate to disclosure of fees and commissions and, where included, non-monetary benefits;3

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    2. (b)

      the rule on information about costs and charges (COBS 6.1.9 R) but only if the hourly rates indicated in the services and costs disclosure document or combined initial disclosure document 3are actual hourly rates rather than indicative hourly rates

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      ;3

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    3. (c)

      the rule on information disclosure before providing services (COBS 2.2.1R (1)(a) and COBS 2.2.1R (1)(d));3

    4. (d)

      the items of distance marketing information, set out in paragraphs (1), (2), (4), (5), (19) and (20) of COBS 5 Annex 1 R;3

    5. (e)

      paragraphs (1) (so far as it relates to the firm's name and address), (4) and (6) of the rule on disclosure of information about a firm and its services (COBS 6.1.4 R); 3

    6. (f)

      the investor compensation scheme rule in COBS 6.1.16R (1) and (2); and3

    7. (g)

      the rule on information to be provided by an insurance intermediary (COBS 7.2.1 R (1) and COBS 7.2.1 R (2)).3

  5. (5)

    [deleted]3

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    1. (a)

      [deleted]3

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    2. (b)

      [deleted]3

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    3. (c)

      [deleted]3

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    4. (d)

      [deleted]3

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    5. (e)

      [deleted]3

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COBS 6.3.4RRP

For the purposes of GEN 5, a firm may not use the Key facts logo in relation to any document that is designed to comply with rules in COBS 5, 6.1 or COBS 7 unless it is a services and costs disclosure document or a 3 combined initial disclosure document produced in accordance with the templates and Notes in the annexes to this chapter.

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COBS 6.3.5GRP

Each of the services and costs disclosure document and3 combined initial disclosure document that a firm provides to a client should be documents which the firm reasonably considers will be, or are likely to be, appropriate for the client having regard to the type of service which the firm may provide or business which the firm may conduct.

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COBS 6.3.6GRP
  1. (1)

    A firm will satisfy the requirements as to timing in the rules referred to in COBS 6.3.3G (4) if its representative provides information to the client on first making contact with the client.2

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  2. (2)

    [deleted]32

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Services and costs disclosure document and combined initial disclosure document3

COBS 6.3.7GRP
  1. (1)

    A services and costs disclosure document3 is a document that contains the Key facts logo, headings and text in the order shown in COBS 6 Annex 1 and in accordance with the Notes.

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  2. (2)

    A combined initial disclosure document is a document that contains the Key facts logo, headings and text in the order shown in COBS 6 Annex 2 and in accordance with the Notes.

COBS 6.3.8GRP

A firm may include, in a services and costs disclosure document or a combined initial disclosure document,3 information required by COBS or by the rule on disclosing a tied agent's capacity (SUP 12.6.13 R) and which is not in the template for the services and costs disclosure document or combined initial disclosure document,3if the information would be sufficiently prominent. For example, a firm may wish to use those documents to satisfy:3

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  1. (1)

    the parts of the rule on information about the firm and its services (COBS 6.1.4 R);3

  2. (2)

    the rule on costs and associated charges (COBS 6.1.9 R);3

  3. (3)

    the items of distance marketing information described in paragraphs (6), (8), (10) and (11) of COBS 5 Annex 1 R;3

that would not otherwise be satisfied by providing the services and costs disclosure document or combined initial disclosure document.3

COBS 6.3.9GRP

Firms can obtain from the FSA website http://www.fsa.gov.uk a specimen of the services and costs disclosure document and the combined initial disclosure document.3 A firm may produce its services and costs disclosure document or combined initial disclosure document 3by using its own house style and brand. Electronic tools to help firms to construct their own versions of these documents 3 are available from the FSA website.

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COBS 6.3.10G
  1. (1)

    [deleted]3

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  2. (2)

    [deleted]3

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COBS 6.3.11R
  1. (1)

    [deleted]3

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  2. (2)

    [deleted]3

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COBS 6.3.12G

[deleted]3

3
  1. (1)

    [deleted]3

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  2. (2)

    [deleted]3

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  3. (3)

    [deleted]3

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COBS 6.3.13G

[deleted]3

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COBS 6.3.14GRP

A firm would be unlikely to comply with the client's best interests rule and the fair, clear and not misleading rule, 3if:3

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  1. (1)

    the services and costs disclosure document or the combined initial disclosure document that it provided initially did not reflect relevantexpected commission arrangements; or3

  2. (2)

    the firm arranged to retain any commission which exceeded the amount or rate disclosed without first providing further appropriate inducements information and obtaining the client's prior informed consent to the proposed alteration in a durable medium.3

COBS 6.3.15G

[deleted]3

3
COBS 6.3.16G

[deleted]3

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Provision of information on request

COBS 6.3.17G

A firm should take reasonable steps to ensure that its representative provides3a copy of the appropriate range of packaged products to a client on the client's request.

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COBS 6.3.18G
  1. (1)

    [deleted]3

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  2. (2)
    1. (a)

      [deleted]3

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      1. (i)

        [deleted]3

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      2. (ii)

        [deleted]3

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    2. (b)

      [deleted]3

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Telephone sales

COBS 6.3.19GRP

In cases where firms make initial contact with a client on the telephone a firm may, in addition, have to take into account and comply with the requirements in this sourcebook applicable to the conclusion of distance contracts3 (see COBS 5).

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COBS 6.3.20GRP
  1. (1)

    In accordance with the rule on information disclosure before providing services (COBS 2.2.1 R), if a firm's initial contact with a retail client with a view to providing a personal recommendation on packaged products is by telephone then the following information should be provided before proceeding further:

    1. (a)

      the name of the firm and, if the call is initiated by or on behalf of a firm, the commercial purpose of the call;

    2. (b)

      whether the firm offers packaged products3 from the whole market or from a limited number of companies or from a single company or a3 single group of companies;

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    3. (c)

      whether the firm will provide the client with a personal recommendation on packaged products;

    4. (d)

      that the client can request a copy of the appropriate range of packaged products;

    5. (e)

      whether the firm offers a fee-based service, a commission-based service, a service based on a combination of fee and commission, or a combination of these services, and the consequences for the client of proceeding with each type of service; and

    6. (f)

      that the information given under (a) to (e) will subsequently be confirmed in writing.

  2. (2)

    If a firm's initial contact with a retail client is by telephone in circumstances in which the firm would otherwise provide a services and costs disclosure document, or a combined initial disclosure document,3 it should consider sending the client the document as soon as is reasonably practicable following the conclusion of the call.

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Group Personal Pensions

COBS 6.3.21RRP

A firm must take reasonable steps to ensure that its representatives when making contact with an employee with a view to giving a personal recommendation on his employer's group personal pension scheme or stakeholder pension scheme, inform the employer:

  1. (1)

    that the firm will be providing a personal recommendation on group personal pension schemes and/or stakeholder pension schemes provided by the employer;

  2. (2)

    whether the employee will be provided with a personal recommendation that is restricted to the group personal pension scheme or stakeholder pension scheme provided by the employer or the recommendation will also cover other products;

  3. (3)

    the amount and nature of any payments that the employee will have to pay, directly or indirectly, for the personal recommendation.

COBS 6.3.22G

The payments that the employee would have to pay could be:

  1. (1)

    fees;

  2. (2)

    commission;

  3. (3)

    commission equivalent;

  4. (4)

    a combination of the above.