Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.

PROD 6.3 Distribution of pathway investments

PROD 6.3.1R

12A firm must not distribute a pathway investment unless it is compatible with the needs, characteristics and objectives of those retail clients that fall within the pathway investment’s target market, taking into account the investment pathway options in COBS 19.10.17R(1).

PROD 6.3.2R

When carrying out the compatibility assessment referred to in PROD 6.3.1R, firms must take into account:

  1. (1)

    the price and complexity of the pathway investment; and

  2. (2)

    where the firm is referring retail clients to be transferred to the personal pension scheme or stakeholder pension scheme operated by another firm, they must also take into account:

    1. (a)

      the charges and other product features of that other firm’s drawdown product;

    2. (b)

      the financial strength of that other firm; and

    3. (c)

      the reliability and efficiency of that other firm in relation to its dealings with retail clients.

PROD 6.3.3R

A firm must review the distribution arrangements for the pathway investments it distributes at least on a two-yearly basis to ensure:

  1. (1)

    the distribution arrangements are still valid and up to date; and

  2. (2)

    the pathway investments remain compatible with, and are being distributed to, their target market in accordance with PROD 6.3.1R.

PROD 6.3.4G

A firm to which the record-keeping rules in SYSC 3 or SYSC 9 apply should maintain, in relation to its distribution of pathway investments, a record of the process undertaken to select each pathway investment, and of the review conducted for each pathway investment to comply with PROD 6.3.3R.

Obligations on firms where retail clients are not acting in their interests

PROD 6.3.5R

Where a firm (A) refers retail clients to another firm (B), where B can offer a pathway investment to the retail client if the retail client transfers to the personal pension scheme or stakeholder pension scheme operated by B, both A and B must comply with PROD 6.3.6R.

PROD 6.3.6R

Where:

  1. (1)

    A becomes aware of a pattern of retail clients choosing to stay with A and not transferring to B; and

  2. (2)

    A considers that this choice is unlikely to be in the interests of those retail clients, having regard to their objectives and characteristics; then

  3. (3)

    A must promptly inform B of its concerns in (1) and (2); and

  4. (4)

    A and B must each take reasonable steps to minimise the potential harm to retail clients.

PROD 6.3.7G

Reasonable steps for the purposes of PROD 6.3.6R may include A and B making it easier for retail clients to transfer to the personal pension scheme or stakeholder pension scheme operated by B.