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SIFA 9.15 Key Features

SIFA 9.15.1G

Consumers need key features so that they can understand the product and compare it with different packaged products. The COB 6 requirements expand on Principle 7 that requires a firm to pay due regard to the information needs of its customers.

Key features document

SIFA 9.15.2G

At the core of the regime is the Key Features Document (KFD) that your firm must give to consumers before they complete an application for any packaged product or cash deposit ISA. Product providers must produce key features for every packaged product that they provide. Under the rules set out in COB 6.5, all KFDs should be split into a number of sections and the information disclosed will vary depending on the type of product. COB 6.4 explains the product disclosure required in some special situations.

SIFA 9.15.3G

KFDs must contain an illustration of the effect of charges over time on what the consumer might get back (COB 6.5.24 and COB 6.5.31 ). In many cases, mainly for life products, an additional illustration is required to show the investor what he might get back assuming set rates of return (COB 6.5.15 ). Your firm may provide these illustrations in a document separate from the main text of the KFD but presented with it.

SIFA 9.15.4G

In the case where a consumer has responded to a direct offer financial promotion, the information package that they receive should contain example-based key features documents. There is no need to provide a further set of key features for this transaction (COB 6.2.8 ).

SIFA 9.15.5G

A firm may delay the provision of a KFD when a customer is buying a life policy (which includes a pension policy) without making a written application. However, that firm must give an adequate oral explanation of the main features of the product, and must send the customer a KFD within five business days of the sale (COB 6.2.9 (2)).

SIFA 9.15.6G

For the rules relating to the provision of KFDs when there are variations to existing life policies please refer to COB 6.2.16 to COB 6.2.19 .

SIFA 9.15.7G

COB 6.2.12 deals with the provision of revised key features where the terms of a proposed life policy are subsequently altered before the private customer completes the application form.

Financial promotion rules

SIFA 9.15.8G

You are reminded that key features are a form of financial promotion and are subject to the rules contained in COB 3 (see also section 9.3 of this Overview on financial promotions).

Record keeping requirements

SIFA 9.15.9G

Your firm must keep records of its key features as governed by the rules applying to record keeping of non-real time financial promotions ( COB 3.7). Also see section 9.3 in this Overview.

Upcoming developments

SIFA 9.15.10G

We have set out in CP170 new proposals for product disclosure at the point of sale, which will see the Key Features Document and 'illustrations' replaced by a Key Facts Document and 'examples'. The main focus of our work has been to develop a Key Facts Document consumers will recognise, read, and understand.

SIFA 9.15.11G

The proposals make little change to the disclosure regime in terms of the products to which it relates. The requirement for full, clear, fair and not misleading product disclosure will remain the bedrock of the regime. The main costs of the change will be borne by life and non-life product providers who are responsible for producing the key facts information.

SIFA 9.15.12G

A policy statement, RM19, giving feedback to the responses we received to CP170 will be published in 2004. We expect to implement the revised rules in 2005. For detailed information on the new proposals see CP170, 'Informing Consumers: Product Disclosure at the Point of Sale' (February 2003).

SIFA 9.15.13G

The following sections of this Overview are also relevant:

•'Financial promotions' - Chapter 9.3;

•'Suitability' - Chapter 9.9; and

•'Assessing your customer's understanding of risk' - Chapter 9.10.