offer, give, solicit or accept an inducement; or
if it is likely to conflict to a material extent with any duty that the firm owes to its customers in connection with such a home finance transaction2 or any duty which such a recipient firm owes to its customers in connection with such a home finance transaction.222
An inducement is a benefit offered with a view to bringing about a particular course of action.
The purpose of MCOB 2.3.2 R(2) is to prevent the requirement in MCOB 2.3.2 R(1) being circumvented by an inducement being given or received by an unregulated associate. There may be circumstances, however, where a firm is able to demonstrate that it could not reasonably have knowledge of an associate giving or receiving an inducement. It should not, however, direct business to another person on the instruction of an associate if this is likely to conflict with the interests of its customers.
- (1) 22
giving or receiving indirect benefits (such as gifts, hospitality and promotional competition prizes);
providing in either case this is not likely to give rise to a conflict with the duties that the recipient owes to the customer. In particular, such benefits should not be of a kind or value that is likely to impair the ability of a firm to act in compliance with any rule in MCOB, for example the suitability requirements in MCOB 4.7 (Advised sales).
A firm must not operate a system of giving or offering inducements to a mortgage intermediary, reversion intermediary or any other third party whereby the value of the inducement increases if the intermediary2 or third party, such as a packager, exceeds a target set for the amount of business referred (for example, a volume override).22
- (1) 2
- (2) 2
Quantification of any material inducement offered by the mortgage lender or reversion provider2 supports the disclosure requirements elsewhere in MCOB. Further guidance on the disclosure of any inducement in cash terms is provided in MCOB 5.6.118 G for regulated mortgage contracts other than lifetime mortgages, MCOB 9.4.124 G for lifetime mortgages and MCOB 9.4.173 G for home reversion plans.2
A payment made to a third party unconnected with thehome finance intermediary,2 where that payment only reflects the cost of outsourcing work relating to the processing of mortgage applications, would not be considered an inducement for these purposes.222