Related provisions for MCOB 6.4.9

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MCOB 9.4.1GRP
MCOB 9.4 sets out the required content of an illustration for a regulated lifetime mortgage contract provided to a customer by a firm.
MCOB 9.4.2RRP
An illustration provided to a customer must:(1) contain the material set out in MCOB 9 Annex 1 in the order and using the numbered section headings, sub-headings and prescribed text in MCOB 9 Annex 1, except where provided for in MCOB 9.4;(2) follow the format of the template in MCOB 9 Annex 1, with:(a) prominent use of the 'key facts' logo followed by the text 'about this lifetime mortgage' (if a firm resizes the logo it must ensure that the proportions remain consistent with
MCOB 9.4.3GRP
(1) Firms can obtain from the FSA website http://www.fsa.gov.uk a specimen of the "key facts" logo. When reproducing the logo firms may use colour providing this does not diminish the prominence of the logo.(2) MCOB 9.4.2 R(3) does not prevent the use of different fonts and typefaces for headings and risk warnings. Its purpose is to prevent particular sections of the illustration from being made less prominent than other sections through the inconsistent use of font sizes and
MCOB 9.4.4RRP
A firm must include in the illustration all prescribed section headings in MCOB 9 Annex 1, except that:(1) in Section 8 (What you owe and when):(a) Section 8 (A) (details of mortgage payments) is only required where the customer is required to make payments to the mortgage lender in respect of the capital or all or part of the interest charged on the regulated lifetime mortgage contract;(b) Section 8(B) (projection of roll-up of interest) is only required where all or part of
MCOB 9.4.5RRP
The illustration provided to a customer must:(1) contain only the material specified in MCOB 9.4 and no other material except where provided for elsewhere in MCOB 9.4; and(2) be in a document separate from any other material that is provided to the customer.
MCOB 9.4.6RRP
As a minimum the illustration must be personalised to reflect the following:(1) the specific regulated lifetime mortgage contract in which the customer is interested;(2) the amount of the loan required by the customer, or for drawdown mortgages, the amount the customer wishes to draw down on a monthly (or such frequency that amounts are available) basis. Where the amount the customer can draw down is variable, the firm must agree with the customer an expected amount to be drawn
MCOB 9.4.7GRP
A firm should not illustrate more than one regulated lifetime mortgage contract in the same illustration, for example by using one illustration to compare alternative products.
MCOB 9.4.8GRP
MCOB 9.4.6 R sets out minimum requirements. The illustration may be personalised to a greater degree if the mortgage lender or mortgage intermediary wishes, subject to the restrictions on the information that can be obtained from the customer in MCOB 9.3.12 R when the illustration is provided in accordance with MCOB 5.5.1 R(2)(c).
MCOB 9.4.9GRP
In relation to MCOB 9.4.6 R(3), in order for the firm to comply with the principle of "clear, fair and not misleading" in MCOB 2.2.6 R, an estimated valuation, where the estimated valuation is not that provided by the customer, must be a reasonable assessment based on all the facts available at the time. For example, an overstated valuation could enable a more attractive regulated lifetime mortgage contract to be illustrated on the basis of a lower ratio of the loan amount to
MCOB 9.4.10RRP
(1) In estimating a term under MCOB 9.4.6 R(5) a firm must:(a) use the following mortality table: PMA92(C=2010) and PFA92(C=2010) for males and females respectively, derivable from the Continuous Mortality Investigation Report 17, published by the Institute of Actuaries and the Faculty of Actuaries in 1999; and2(b) for the purposes of the illustration, where the table does not result in a life expectancy expressed in whole years, the term should be rounded up to the next whole
MCOB 9.4.11RRP
Where the illustration is issued to two or more customers who intend to borrow jointly, the term estimated in accordance with MCOB 9.4.10 R should be based on the longest life expectancy.
MCOB 9.4.12RRP
If the customer requests an illustration showing a term of the customer's choice, that illustration must be issued in addition to the illustration showing the term calculated in accordance with MCOB 9.4.10 R. The term chosen should be stated in Section 4 of the illustration "What you have told us" (see MCOB 9.4.21 R(2)).
MCOB 9.4.13RRP
The amount referred to in MCOB 9.4.6 R(2) is:(1) the amount that the customer has asked to borrow or draw down; or(2) where the regulated lifetime mortgage contract is a revolving credit agreement such as a secured overdraft or mortgage credit card, the total borrowing that the firm is willing to provide under the regulated lifetime mortgage contract; or(3) in cases where, on the basis of the information obtained from the customer before providing the illustration, it is clear
MCOB 9.4.14GRP
MCOB 9.4.13 R(3) does not require information to be obtained from the customer before providing an illustration in order to ascertain the amount the customer is eligible to borrow. Instead, its purpose is to avoid a firm being in a position where it would otherwise have to provide a customer with an illustration for an amount it knew the customer would not be eligible for, based on whatever information it had obtained from the customer before providing the illustration.
MCOB 9.4.15RRP
Where the illustration relates to a regulated lifetime mortgage contract that is sub-divided into different parts with different types of interest rate or different rates of interest or different conditions, or a combination of these, the requirements in MCOB 9.4 may be adapted to accommodate this. The adaptations made must be limited to those that are necessary.
MCOB 9.4.17RRP
The following information must be included at the head of the illustration: (1) the customer's name;(2) the date of issue of the illustration;(3) details of how long the illustration is valid for, and whether there is any date by which the regulated lifetime mortgage contract covered by the illustration needs to commence (for example, where a fixed interest rate is only available if the regulated lifetime mortgage contract commences before a certain date); and(4) the prescribed
MCOB 9.4.18RRP
Under the section heading "About this information", the prescribed text in MCOB 9 Annex 1 under this heading must be included.
MCOB 9.4.19RRP
(1) Unless (2) applies, under the section heading "Which service are we providing you with?" the prescribed text in MCOB 9 Annex 1 under this heading must be included with a "check box" for each statement, one of which must be marked prominently to indicate the level of service provided to the customer:(2) If the level of service described in the illustration is provided by another firm, (1) may be replaced by the following:Under the section heading "Which service are we providing
MCOB 9.4.20RRP
Under the section heading "What is a lifetime mortgage?", the prescribed text in MCOB 9 Annex 1 under this heading must be included.
MCOB 9.4.21RRP
(1) Under the section heading "What you have told us", the illustration must state the information that has been obtained from the customer under MCOB 9.4.6 R and MCOB 9.3.12 R (apart from MCOB 9.4.6 R(1) and MCOB 9.4.6 R(5) which are provided for in Section 5 of the illustration ), and can include brief details of any other information that has been obtained from the customer and used to produce the illustration.(2) Where the customer requests an additional illustration showing
MCOB 9.4.22RRP
At the end of Section 4 of the illustration a statement must be included making clear that changes to any of the information obtained from the customer, and where appropriate to the valuation of the property, could alter the details elsewhere in the illustration and encouraging the customer to ask for a revised illustration in this event.
MCOB 9.4.23GRP
An example of the type of statement that would satisfy MCOB 9.4.22 R is:"The valuation that will be carried out on the property, and changes to any of the information you have given us, could alter the information in this illustration. If this is the case please ask for a revised illustration."
MCOB 9.4.24RRP
Under the section heading "Description of this mortgage" the illustration must:(1) state the name of the mortgage lender providing the regulated lifetime mortgage contract to which the illustration relates (a trading name used by the mortgage lender may also be stated in accordance with MCOB 9.4.2 R(6)), and the name, if any, used to market the regulated lifetime mortgage contract;(2) include a statement describing the regulated lifetime mortgage contract;(3) if the regulated
MCOB 9.4.25GRP
Examples of types of statement that would satisfy MCOB 9.4.24 R(2) are as follows (more than one may apply to particular types of regulated lifetime mortgage contract):(1) For a roll-up of interest mortgage:"You do not have to make any repayments during the life of this lifetime mortgage. The loan, all of the interest and charges due to [name of mortgage lender] will be repaid from the sale of your home. This will happen on your death [or the death of the last borrower] or if
MCOB 9.4.26RRP
MCOB 9.4.27 R sets out some examples of descriptions of interest rate types and rates of interest that must be used in the illustration to comply with MCOB 9.4.24 R(4). If an interest rate is not described in MCOB 9.4.27 R, it must be presented in the illustration in a way that is consistent with the descriptions in MCOB 9.4.27 R.
MCOB 9.4.28RRP
Where the loan under the regulated lifetime mortgage contract is divided into more than one part (for example where part of the loan is a fixed interest rate and part of the loan is a discounted variable interest rate) and the firm displays this in a tabular format in the illustration:(1) the following text must be used to introduce the table "As this lifetime mortgage is made up of more than one part, these parts are summarised below:";(2) each part must be numbered for ease
MCOB 9.4.29RRP
Further information about the regulated lifetime mortgage contract may be included in Section 5 of the illustration as long as it does not significantly:(1) duplicate information contained elsewhere in the illustration; and(2) extend the length of this section.
MCOB 9.4.30GRP
An example of further information that may be included in accordance with MCOB 9.4.27 R might be that an "approval in principle" has been granted subject to valuation and satisfactory credit reference.
MCOB 9.4.31RRP
Under the section heading "Benefits", the illustration must include:(1) a description of the monetary amount(s), and in a box aligned to the right of the document, the monetary amount(s) that the customer will receive as a lump sum and/or as a monthly [or such other frequency as is applicable] payment;(2) where the regulated lifetime mortgage contract is linked to an investment and the payments required on the regulated lifetime mortgage contract will be deducted from the income
MCOB 9.4.32GRP
Examples of text that would satisfy MCOB 9.4.31 R(1), depending on the nature of the regulated lifetime mortgage contract, are:(1) "This lifetime mortgage will provide a lump sum of £[x].";(2) "The amount you are borrowing will automatically be used to purchase a [name of linked investment product] from [name of provider]. The amount is £[x]."; and(3) "You will receive a monthly [or such other frequency as is applicable] payment from the start of your lifetime mortgage. This will
MCOB 9.4.33RRP
The illustration must include under the heading "Risks - important things you must consider" statements and warnings on the following:(1) a brief statement of the specific circumstances in which the mortgage lender is able to repossess the property;(2) a statement of how the mortgage lender will treat any negative equity arising during the life of the regulated lifetime mortgage contract and at the time the amount borrowed under the regulated lifetime mortgage contract is due
MCOB 9.4.35RRP
Under the heading "Risks - important things you must consider" the illustration must also include the following if they apply:(1) for drawdown mortgages where there is a monthly (or such other frequency as may apply) cash sum payable, a statement that inflation can erode the value of the cash sum over time; (2) where:(a) the regulated lifetime mortgage contract is linked to an investment; and(b) the payments required on the regulated lifetime mortgage contract will be deducted
MCOB 9.4.36GRP
The section headed "What you will owe and when" (A) 'Details of mortgage payments' will apply only where the customer is required to make payments to the mortgage lender during the life of the regulated lifetime mortgage contract in respect of all or part of the interest, or part of the capital, charged on the regulated lifetime mortgage contract. This will include those cases where the interest payment is deducted from the income provided by a linked investment product (such
MCOB 9.4.37RRP
The heading of the column on the right-hand side of Section 8 of the illustration must state the frequency with which payments must be made by the customer. (For example, if payments are to be made on a monthly basis, the heading for this section must be "What you will owe and when" and the column must be headed "Monthly payments".1
MCOB 9.4.38RRP
All the payments in Section 8 of the illustration must be calculated based on the frequency used for the purposes of the heading in MCOB 9.4.37 R and must be shown in the column on the right-hand side of this section.
MCOB 9.4.39RRP
Section 8 of the illustration must contain the following information:(1) the loan amount on which the illustration is based. This figure should include all fees, charges and insurance premiums that have been added to the loan in accordance with MCOB 9.4.21 R(3) and MCOB 9.4.21 R(4), and the following text must follow the loan amount:"which include[s] the [fees] [and] [insurance premiums] that are shown in [Section 11] [and] [Section 12] as being added to your lifetime mortgage.";(2)
MCOB 9.4.40GRP
If appropriate, the two statements required by MCOB 9.4.39 R(1) and MCOB 9.4.39 R(2) may be merged, for example "These payments are based on a loan amount of £x and assume that the lifetime mortgage will start on [dd/mm/yy].".
MCOB 9.4.41GRP
MCOB 9.4.39 R(3) applies to each interest rate charged on the regulated lifetime mortgage contract covered by the illustration. This means that it applies to different interest rates charged at different times, for example, where the interest rate changes at the end of any initial discounted, fixed or other special interest rate period.
MCOB 9.4.42GRP
The firm may determine the assumed start date in MCOB 9.4.39 R(2).
MCOB 9.4.43RRP
The following information must be included in the description of the interest rate required by MCOB 9.4.39 R(3)(c) except where MCOB 9.4.47 R applies:(1) where the interest rate can change, the word "currently" must be used to illustrate the current interest rate payable; and(2) where the interest rate changes after a given period the words "followed by" should be used to indicate this.
MCOB 9.4.44GRP
An example of how the information required by MCOB 9.4.39 R(3) and MCOB 9.4.43 R may be presented when there is an example term of fifteen years, and an initial fixed interest rate for a period of 22 months followed by the mortgage lender's standard variable interest rate for a period of 158 months, is as follows:"22 payments at a fixed rate of [...]%followed by158 payments at a variable rate, currently [...]%.".
MCOB 9.4.47RRP
Where the loan under the regulated lifetime mortgage contract is divided into more than one part (for example, where part of the loan is on a fixed interest rate and part on a discounted variable interest rate) and the firm displays the initial cost of all parts, and the total cost, in a tabular format in the illustration, MCOB 9.4.39 R(3) and MCOB 9.4.43 R do not apply; instead:(1) each part must be numbered for ease of reference in the illustration;(2) the loan amounts must
MCOB 9.4.49GRP
Section 8 headed "What you will owe and when" (B) "Projection of roll-up of interest" applies only where all or part of the interest due over the life of the regulated lifetime mortgage contract is added to the loan and paid to the mortgage lender on repayment of the loan. The projection should be based on the term of the regulated lifetime mortgage contract estimated in accordance with MCOB 9.4.10 R (and if required, MCOB 9.4.12 R).
MCOB 9.4.51RRP
The table showing the projection in the section headed "Projection of roll-up of interest" should show annual details in columns under the following headings:(1) "Year": this should list the years as 1,2,3... etc. The start date for year one must be an assumed date of completion of theregulated lifetime mortgage contract. The table must show each year of the term estimated in accordance with MCOB 9.4.10 R (or if required, MCOB 9.4.12 R).(2) "Balance at start of year": this must
MCOB 9.4.53RRP
Where the customer is required to make payments to the mortgage lender on theregulated lifetime mortgage contract, the illustration must include the following under the section heading "Will the interest rate change?":(1) if the interest rate is fixed throughout the life of theregulated lifetime mortgage contract, an explanation that the payments will not vary because the interest rate is fixed;(2) if the interest rate is fixed for part of the life of theregulated lifetime mortgage
MCOB 9.4.54RRP
(1) Except where (3) applies, where the customer is required to make payments to the mortgage lender on theregulated lifetime mortgage contract, and the customer's payments can vary with changes in interest rates at any time during the life of theregulated lifetime mortgage contract, Section 9: "Will the interest rate change?" must also contain the following text:"The [frequency of payments from MCOB 9.4.37 R] payments shown in this illustration could be considerably different
MCOB 9.4.55RRP
The amount by which the customer's payments would increase in accordance with MCOB 9.4.54 R(1) must be calculated as follows:(1) the firm must use the total amount borrowed, or assume that all payments due on the regulated lifetime mortgage contract have actually been paid, all additional fees and payments due have been paid, and no underpayments or overpayments have been made; and(2) the interest rate from which the increase is calculated must be the variable interest rate charged
MCOB 9.4.57RRP
Where the customer is not required to make payments to the mortgage lender on the regulated lifetime mortgage contract and therefore all or part of the interest is rolled up, the following information must be included under the section heading "Will the interest rate change?":(1) if the interest rate is fixed throughout the life of theregulated lifetime mortgage contract, an explanation that the estimated debt shown in accordance with MCOB 9.4.51 R(6) will not vary because the
MCOB 9.4.58RRP
Where the customer is not required to make payments to the mortgage lender on the regulated lifetime mortgage contract and therefore all or part of the interest is rolled up, Section 9: "Will the interest rate change?" must also contain (if applicable):(1) if the interest rate is variable, the following text:"If the interest rate increases, the amount you owe will also increase. If the interest rate was [one percentage point higher than shown MCOB 9.4.51 R(4)(b)] throughout the
MCOB 9.4.59RRP
Where MCOB 9.4.54 R(1) applies, the following words must also be prominently displayed at the end of the sub-section "Will the interest rate change?""Rates may increase by much more than this so make sure you can afford the [insert frequency of payments from MCOB 9.4.37 R] payment.".
MCOB 9.4.60RRP
Where MCOB 9.4.58 R(1) or (2) applies, the following words must also be prominently displayed at the end of the sub-section "Will the interest rate change?""Your debt may increase significantly."
MCOB 9.4.62RRP
Where the customer is required to make payments to the mortgage lender on the regulated lifetime mortgage contract in respect of the interest payable, and therefore the amount outstanding on the regulated lifetime mortgage contract will broadly remain unchanged, Section 10: "How the value of your home could change" must contain the following text:"The amount you owe will usually stay the same over the life of the mortgage so the amount due to [name of mortgage lender] when the
MCOB 9.4.63RRP
Where the customer is not required to make payments to the mortgage lender on the regulated lifetime mortgage contract and therefore all or part of the interest is rolled up, Section 10: "How the value of your home could change" must contain the following text:"When you look at how the amount you owe goes up, remember also that property prices can go up or down, and this can affect the amount of money left over for you or your estate after the mortgage is repaid to [name of mortgage
MCOB 9.4.64RRP
Section 10: "How the value of your home could change" must contain the following text in addition to the text in accordance with MCOB 9.4.62 R or MCOB 9.4.63 R:"Based on the estimated value of your home now of [insert amount from MCOB 9.4.6 R(3)] this example shows what the value of your home would be after [insert term from MCOB 9.4.10 R or MCOB 9.4.12 R] years if the value went up by 1% each year or went down by 1% each year. Remember also that the mortgage may run for more
MCOB 9.4.65RRP
Under the section heading "What fees must you pay?" the illustration must:(1) itemise all the fees that are included in the calculation of the APR in accordance with MCOB 10 (Annual Percentage Rate), excluding any charges for insurance set out in Section 12 in accordance with MCOB 9.4.72 R; and1(2) include a statement at the end of the section using the following text:"You may have to pay other taxes or costs in addition to any fees shown here.".
MCOB 9.4.66GRP
An example of a fee that would be included in Section 11 would be an administrative charge to redeem theregulated lifetime mortgage contract. An example of a fee that would not be included would be a fee payable by the customer to insure their property elsewhere (however this would need to be stated in the separate "Insurance" section as required by MCOB 9.4.72 R). Where fees are payable only on early repayment of theregulated lifetime mortgage contract. they should not be stated
MCOB 9.4.67RRP
The fees included in this section in accordance with MCOB 9.4.65 R must be itemised under the relevant sub-headings as follows:(1) the fees that are payable by the customer to the mortgage lender must be itemised under the sub-heading "Fees payable to [name of mortgage lender]";(2) the remaining fees must be itemised under the sub-heading: "Other fees"; and(3) (a) if there are no fees to be itemised in accordance with (1), the sub-heading must be retained and a statement must
MCOB 9.4.68RRP
The following information must be provided for each fee included in this section of the illustration in accordance with MCOB 9.4.65 R(1):(1) a description of the fee;(2) the amount payable by the customer recorded in a column headed "Fee amount" on the right-hand side of this section;(3) for fees included under the sub-heading "Other fees", to whom the fee is payable;(4) when the fee is payable;(5) whether or not the fee is refundable, and if so, the extent to which it is refundable;(6)
MCOB 9.4.69RRP
(1) If a higher lending charge is payable by the customer, the following text must be used to describe such a charge for the purposes of MCOB 9.4.68 R:"A higher lending charge is payable because you are borrowing [insert the ratio of the mortgage amount (from MCOB 9.4.13 R) to the property's price or value (from MCOB 9.4.6 R(3))] of the property's [estimated] [price/value]."(2) If the customer has asked for any fees to be added to the loan, this must be stated alongside each fee.2(3)
MCOB 9.4.70GRP
"Other fees" will include any fee charged by a mortgage intermediary, or another third party, for advising on or arranging aregulated lifetime mortgage contract, but not commission or procuration fees (which are dealt with in Section 16 of the illustration).
MCOB 9.4.72RRP
(1) Under the section heading "Insurance" the illustration must include details of:(a) insurance which is a tied product and(b) insurance which is required as a condition of the regulated lifetime mortgage contract which is not a tied product(2) Under this section heading a firm may also provide details of insurance which is optional for the customer to take out.(3) It must be clear to the customer which products he is required to purchase under which circumstances (for example,
MCOB 9.4.76RRP
The following information must be included under the sub-heading "Insurance you must take out as a condition of this mortgage but that you do not have to take out through [insert name of mortgage lender or where relevant the name of the mortgage intermediary, or both]":(1) if the regulated lifetime mortgage contract requires the customer to take out an insurance policy (other than that which is a tied product which the customer is obliged to purchase through the mortgage lender
MCOB 9.4.77GRP
Under the sub-heading "Insurance you must take out as a condition of this mortgage but that you do not have to take out through [insert name of mortgage lender or where relevant the name of the mortgage intermediary, or both]", the illustration should not include any insurance policy that may be taken out by a mortgage lender itself to protect its own interests rather than the customer's interests, for example, because of the ratio of the loan amount to the property value.1
MCOB 9.4.78GRP
If the cost of any insurance that the mortgage lender might take out to protect its own interests because of the ratio of the loan to the property value is passed on to the customer, it will be shown elsewhere in the illustration, for example as a higher lending charge or in the interest rate charged.
MCOB 9.4.79RRP
A firm may include in the illustration, under the sub-heading "Optional insurance", quotations (estimated where necessary) for any insurance products (other than the insurance products covered elsewhere in the illustration in accordance with MCOB 9.4.72 R and MCOB 9.4.76 R) that the firm issuing the illustration wishes to sell to the customer.
MCOB 9.4.80RRP
If no quotations are included in the illustration in accordance with MCOB 9.4.79 R, the sub-heading "Optional insurance" must not be included in the illustration.
MCOB 9.4.81RRP
(1) If any quotations for insurance are included in the illustration in accordance with MCOB 9.4.73 R(3), MCOB 9.4.76 R(1) or MCOB 9.4.79 R, the illustration:(a) must include a brief description only of the type of insurance (full details of the insurance cover may however be provided separately); and(b) (i) must include the total price to be paid by the customer in a column on the right hand side of the illustration under the heading "[insert frequency of payments quoted] payments";
MCOB 9.4.118GRP
The purpose of the illustration is to provide the customer with details of the cost of borrowing the amount required over the example term from MCOB 9.4.6 R and MCOB 9.4.10 R (or MCOB 9.4.12 R). Section 14 has been designed specifically to allow examples of the effect of any additional features of the regulated lifetime mortgage contract such as a linked current account. Examples of these features should therefore be shown in Section 14 and not in Section 15 or Section 8 of the
MCOB 9.4.119RRP
Where the illustration is issued to a customer by, or on behalf of, a mortgage intermediary, Section 16 "Using a mortgage intermediary" must be included in the illustration and must include the following:(1) unless MCOB 9.4.120 R applies, a clear statement of the amount payable (either directly or indirectly) by the mortgage lender to the mortgage intermediary, or to any third parties; and(2) the name of the mortgage lender who will make the payment, the name of the mortgage intermediary
MCOB 7.6.7RRP
Before a customer submits an application to a firm for a further advance on an existing regulated mortgage contract or for a further advance that is a new regulated mortgage contract, if the further advance requires the approval of the mortgage lender, the firm must provide the customer with an illustration that complies with the requirements of MCOB 5 (Pre-application disclosure) and MCOB 7.6.9 R to MCOB 7.6.17 R for the further advance, unless an illustration has already been
MCOB 7.6.8GRP
If a number of different firms are involved in relation to the transaction referred to in MCOB 7.6.7 R, having regard to MCOB 2.5.4 R(2), those firms should take reasonable steps to establish which one of them is responsible for providing the customer with the illustration required by MCOB 7.6.7 R.
MCOB 7.6.9RRP
The illustration provided in accordance with MCOB 7.6.7 R must:(1) be based on the amount of the further advance only;(2) use the term 'additional borrowing' in place of the term 'mortgage' where appropriate throughout the titles and text of the illustration;(3) include an additional section headed: 'Total borrowing' and numbered '7a' after Section 7, including the following text:(a) "This section gives you information about how your mortgage will be affected by taking out this
MCOB 7.6.14RRP
The illustration provided in accordance with MCOB 7.6.7 R may diverge from the requirements of MCOB 5 (Pre-application disclosure) where it is necessary to do so in order to reflect the fact that the illustration is being provided for a further advance.
MCOB 7.6.16RRP
(1) (In the case of a business illustration), MCOB 5.6.16 R is replaced with the following: "Section 1: 'About this illustration' Under the section heading 'About this illustration', the following text must be included:'We are required by the Financial Services Authority (FSA) - the independent watchdog that regulates financial services - to provide you with this illustration.' "(2) (In all other cases), MCOB 5.6.16 R is replaced with the following; "Section 1: 'About this illustration'
MCOB 7.6.17RRP
(1) Where the further advance for which the customer has applied is in the form of an annual insurance premium secured by a first legal charge, a firm:(a) may, instead of providing an illustration in accordance with MCOB 7.6.7 R, provide confirmation of the matters required by MCOB 7.6.5 R; and(b) where (a) applies use the following text:"Your annual insurance premium has been/will be added to your mortgage account [unless you pay it by dd/mm/yy]. If you choose to pay it in full
MCOB 7.6.18RRP
Before a customer submits an application to a firm to change all or part of a regulated mortgage contract from one interest rate to another (for example, a transfer from a variable rate regulated mortgage contract to a fixed rate regulated mortgage contract, or from one fixed rate regulated mortgage contract to another fixed rate regulated mortgage contract), the firm must provide the customer with an illustration for the whole loan that complies with the requirements of MCOB
MCOB 7.6.19GRP
If a number of different firms are involved in relation to the transaction referred to in MCOB 7.6.18 R, having regard to MCOB 2.5.4 R(2), those firms should take reasonable steps to establish which one of them is responsible for providing the customer with the illustration required by MCOB 7.6.18 R.
MCOB 7.6.20RRP
The illustration provided in accordance with MCOB 7.6.18 R may diverge from the requirements of MCOB 5 where it is necessary to do so in order to reflect the fact that the illustration is being provided for a rate switch.
MCOB 7.6.21GRP
MCOB 7.6.20 R allows a firm to make changes to wording and to add, remove or alter information that would otherwise be misleading to the customer. For example, a firm could replace the statement in Section 3 of the illustration, explaining that if information provided by the customer changes, the illustration may be affected, with a statement explaining that the illustration is based on information gathered in the past, which may no longer be accurate.
MCOB 7.6.22RRP
Before a customer submits an application to add or remove a party to a regulated mortgage contract, a firm must provide any customer who will remain or become a party to the contract with an illustration for the whole loan that complies with the requirements of MCOB 5 (Pre-application disclosure).1
MCOB 7.6.23GRP
The FSA would not view: (1) a simple notification of the death of a party to the regulated mortgage contract as an application for the purposes of MCOB 7.6.22 R; or1(2) a guarantor as a party to a regulated mortgage contract;1so MCOB 7.6.22 R does not mean that someone becoming a surviving joint borrower on or a guarantor to the regulated mortgage contract should receive an illustration.1
MCOB 7.6.24GRP
If a number of different firms are involved in relation to the transaction referred to in MCOB 7.6.22 R, having regard to MCOB 2.5.4 R(2), those firms should take reasonable steps to establish which one of them is responsible for providing the customer with the illustration required by MCOB 7.6.22 R.
MCOB 7.6.25RRP
The illustration provided in accordance with MCOB 7.6.22 R may diverge from the requirements of MCOB 5 (Pre-application disclosure) where it is necessary to do so in order to reflect the fact that the illustration is being provided in respect of the addition or removal of a party to the contract.
MCOB 7.6.26GRP
MCOB 7.6.25 R allows the firm to make changes to wording and to add, remove or alter information that would otherwise be misleading to the customer. For example, a firm may choose not to include a property valuation in the 'What you have told us' section of the illustration if the property value does not have a bearing on the terms of the regulated mortgage contract.
MCOB 7.6.31RRP
Where MCOB 7.6.28 R applies, a firm may issue an illustration in accordance with MCOB 5 (Pre-application disclosure) in place of the information set out in MCOB 7.6.28 R.
MCOB 7.6.32RRP
Where MCOB 7.6.28 R applies and the customer simultaneously requests a rate switch or the addition or removal of a party to the contract, a firm will not be required to provide the information in accordance with MCOB 7.6.28 R where it is provided as part of an illustration issued in accordance with MCOB 7.6.18 R or MCOB 7.6.22 R.
MCOB 7.6.33GRP
Where a customer simultaneously requests a rate switch and the addition or removal of a party to the loan, a firm will not be required to provide the customer with a separate illustration for each in accordance with MCOB 7.6.18 R and MCOB 7.6.22 R. The firm may provide the customer with a single illustration that complies with the requirements of MCOB 5 (Pre-application disclosure) for both.1
PERG 5.8.9GRP
In general terms, simply giving information, without making any comment or value judgement on its relevance to decisions which a person may make, is not advice. In this respect, it is irrelevant that a person may be providing information on a single contract of insurance or on two or more. This means that a person may provide information on a single contract of insurance without necessarily being regarded as giving advice on it. PERG 5.8.11 G has guidance on the circumstances
PERG 5.8.10GRP
In the case of article 53, information relating to buying or sellingcontracts of insurance may often involve one or more of the following:(1) an explanation of the terms and conditions of a contract of insurance whether given orally or in writing or by providing leaflets and brochures;(2) a comparison of the features and benefits of one contract of insurance compared to another;(3) the production of pre-purchase questions for a person to use in order to exclude options that would
PERG 5.8.11GRP
In the FSA's opinion, however, such information is likely to take on the nature of advice if the circumstances in which it is provided give it the force of a recommendation. Examples of situations where information provided by a person (P) might take the form of advice are given below.(1) P may provide information on a selected, rather than balanced and neutral, basis that would tend to influence the decision of a person. This may arise where P offers to provide information about
PERG 5.8.16GRP
A key issue for those firms proposing to use pre-purchase questioning is whether the specific questioning used may amount to advice. There are two main aspects:(1) advice must relate to a particular contract of insurance (see PERG 5.8.4 G (Advice must relate to a particular contract of insurance)); and(2) the distinction between information and advice (see PERG 5.8.8 G to PERG 5.8.11 G (Advice or information)).Whether or not pre-purchase questioning in any particular case is advising
PERG 5.8.17GRP
The potential for variation in the form, content and manner of pre-purchase questioning is considerable, but there are two broad types. The first type involves providing questions and answers which are confined to factual matters (for example, the amount of the cover). In the FSA's view, this does not itself amount to advising on contracts of insurance, if it involves the provision of information rather than advice. There are various possible scenarios, including the following:(1)
PERG 5.8.18GRP
The second type of pre-purchase questioning involves providing questions and answers incorporating opinion, judgement or recommendation. There are various possible scenarios, including the following:(1) the pre-purchase questioning may not lead to the identification of any particular contract of insurance; in this case, the questioner has provided advice, but it is generic advice and does not amount to advising on contracts of insurance; and(2) the pre-purchase questioning may
PERG 5.8.19GRP
In the case of PERG 5.8.18G (2) and similar scenarios, the FSA considers that it is necessary to look at the process and outcome of pre-purchase questioning as a whole. It may be that the element of advice incorporated in the questioning can properly be viewed as generic advice if it were considered in isolation. But although the actual advice may be generic, the process has ended in identifying one or more particular contracts of insurance. The combination of the generic advice
PERG 5.8.21GRP
Advice can be provided in many ways including:(1) face to face;(2) orally to a group;(3) by telephone;(4) by correspondence (including e-mail);(5) in a publication, broadcast or web-site; and(6) through the provision of an interactive software system.
PERG 5.8.22GRP
Taking electronic commerce as an example, the use of electronic decision trees does not present any novel problem. The same principles apply as with a paper version (see PERG 5.8.15 G to PERG 5.8.19 G (Pre-purchase questioning (including decision trees))).
PERG 5.8.24GRP
An important exclusion from advising on contracts of insurance relates to advice given in periodical publications, regularly updated news and information services and broadcasts (article 54 of the Regulated Activities Order (Advice given in newspapers etc)). The exclusion applies if the principal purpose of the publication or service taken as a whole (including any advertising content) is neither to give advice of a kind mentioned in article 53 (Advising on investments) or article
MCOB 9.3.3RRP

Table of rules in MCOB 5 replaced by rules in MCOB 9: This table belongs to MCOB 9.3.1R

Subject

Rule(s) or guidance

Rule(s) or guidance replaced by:

Accuracy of the illustration

MCOB 5.4.2R - MCOB 5.4.7G

MCOB 9.3.5R - MCOB 9.3.10G

Information that is not an illustration

MCOB 5.4.14R

MCOB 9.3.11R

Providing anillustration

MCOB 5.5.15R -

MCOB 9.3.12R -

Content ofillustration

MCOB 5.6

MCOB 9.4

MCOB 9.3.5RRP
An illustration on a particular regulated lifetime mortgage contract issued by, or on behalf of a mortgage lender, must be an accurate reflection of the costs of the regulated lifetime mortgage contract.
MCOB 9.3.6RRP
A mortgage intermediary must take reasonable steps to ensure that an illustration which it issues, or which is issued on its behalf, other than that provided by a mortgage lender:(1) is accurate within the following tolerances:(a) no more than one percent or £1, whichever is the greater, below the actual figures charged by the mortgage lender for the following:(i) the total amount payable in Section 15 of the illustration;(ii) the amounts that the customer must pay by regular
MCOB 9.3.9GRP
It is the responsibility of a mortgage intermediary to ensure compliance with MCOB 9.3.6 R. However, where a firm can show that it was reasonable for it to rely on information provided to it by another person, other than the mortgage lender, that an illustration was within the tolerances described in MCOB 9.3.6 R, he may be able to rely on MCOB 2.5.2 R, if this turns out not to be the case.
MCOB 9.3.10GRP
An offer document may not always exactly match the illustration provided before application even when the loan requirements have not changed. For example, where a fixed rate has a defined end date, the total amount payable may be different because the number of payments at the fixed rate has reduced, or the estimated amount of interest to be charged has changed, assuming a later date at which the regulated lifetime mortgage contract will start.
MCOB 9.3.12RRP
In meeting a requestunder MCOB 5.5.1 R(2)(c), the firm must not delay the provision of the illustration by requesting information other than:(1) the information necessary to personalise the illustration in accordance with MCOB 9.4.6 R, if the firm does not already know it;(2) where the firm acts in accordance with MCOB 5.5.11 R (2), such information as is necessary to ascertain whether or not the contract will be a regulated lifetime mortgage contract;(3) where the interest rates,
MCOB 6.4.1RRP
(1) If a firm offers to entering into a regulated mortgage contract with a customer, it must provide the customer with an offer document containing an illustration.(2) The firm's offer in the offer document must be on the basis of the information set out in the illustration provided in accordance with (1).
MCOB 6.4.4RRP
The illustration provided as part of the offer document in accordance with MCOB 6.4.1 R (1) must meet the requirements of MCOB 5.6 (Content of illustrations) with the following modifications:(1) the illustration must be suitably adapted and revised to reflect the fact that the firm is making an offer to a customer and updated to reflect changes to, for example, the interest rate, charges, the exchange rate or the APR required by MCOB 10 (Annual Percentage Rate), at the date the
MCOB 6.4.6RRP
In adapting and revising the illustration that is part of the offer document in accordance with MCOB 6.4.4 R(1) a firm must:(1) avoid amending the format of the information required by MCOB 5.6 (Content of illustrations) where possible, since this could result in the illustration in the offer document being difficult to compare with the illustration originally provided to the customer in accordance with MCOB 5.5.1 R;(2) use, where possible, the same headings, ordering of information,
MCOB 6.4.7RRP
In adapting and revising the illustration in accordance with MCOB 6.4.4 R(1), a firm may:(1) add extra information at the beginning and end of the illustration, such as conditions which are not covered by the illustration;(2) include greater detail within each of the specified sections than that included in an illustration provided in accordance with MCOB 5 (Pre-application disclosure); and(3) leave blank, except for the text 'not applicable', sections that are irrelevant, such
MCOB 6.4.10GRP
MCOB 6.4.9 R prevents a firm from preparing a separate illustration and simply adding it to the existing material provided to the customer at the offer stage.
MCOB 6.4.12GRP
In complying with MCOB 6.4.11 R (6) the firm is not required to repeat in this section of the offer document the cash amounts of the early repayment charges set out in the illustration provided as part of the offer document. The firm may instead insert a reference to the relevant section of that illustration.
COLL 9.4.2RRP
(1) The operator of a recognised scheme must maintain facilities in the United Kingdom for any person, for inspection (free of charge) and for the obtaining (free of charge, in the case of the documents at (c) and (d), and otherwise at no more than a reasonable charge) of copies in English of: (a) the instrument constituting the scheme;(b) any instrument amending the instrument constituting the scheme; (c) the latest prospectus (which must include the address where the facilities
COLL 9.4.3RRP
(1) The operator must maintain facilities in the United Kingdom for any person where: (a) information in English can be obtained about prices of units in the scheme; and(b) a participant may redeem or arrange for redemption of units in the scheme and obtain payment. (2) An operator is treated as complying with paragraph (1) if it ensures participants may sell their units on an investment exchange at a price not significantly different from net asset value; and if so, must inform
COLL 9.4.4RRP
(1) The operator must maintain facilities in the United Kingdom at which the unitholder of a bearer certificate may obtain free of charge: (a) payment of dividends; and(b) details or copies of any notices which have been given or sent to participants in the scheme. (2) The operator must state:(a) the nature of the right represented by the units in the scheme; and(b) whether persons other than unitholders can vote at meetings of unitholders and, if so, who those persons are.
COLL 9.4.6RRP
(1) The address of the facilities maintained by the operator in accordance with this section and the details of the facilities so maintained must be stated in the prospectus of the scheme.(2) The address of the facilities referred to in (1) must be the address of the operator's principal place of business in the United Kingdom, or, if there is no such address,, the alternative address in paragraph (3).(3) The alternative address is such convenient address as the operator determines,
MCOB 9.5.2RRP

Table of modified cross-references to other rules:

This table belongs to MCOB 9.5.1 R.

Subject

Rule or guidance

Reference in rule or guidance

To be read as a reference to:

Application: What?

MCOB 6.1.5R

MCOB 6

MCOB 6 as modified by MCOB 9.5

Content of offer document

MCOB 6.1.6G

MCOB 5.6

MCOB 9.4

Purpose

MCOB 6.2.1G

MCOB 6

MCOB 6 as modified by MCOB 9.5

General

MCOB 6.3.2R

Records

MCOB 6.4.3R

Modifications to the illustration

MCOB 6.4.5G

MCOB 6.4.4R(5)(b)

MCOB 9.5.4R(6)(b)

Modifications to the illustration

MCOB 6.4.6R

MCOB 6.4.4(1)

MCOB 9.5.4R(1)

Modifications to the illustration

MCOB 6.4.6R(1) and (2)

MCOB 5.6

MCOB 9.4

Modifications to the illustration

MCOB 6.4.7R

MCOB 6.4.4R(1)

MCOB 9.5.4R(1)

Modifications to the illustration

MCOB 6.4.7R(2)

MCOB 5

MCOB 9

Modifications to the illustration

MCOB 6.4.7R(3)

MCOB 5.6.73R to MCOB 5.6.83G

MCOB 9.4.72R to MCOB 9.4.82G

Modifications to the illustration

MCOB 6.4.7R(3)

MCOB 5.6.92R to MCOB 5.6.112G

MCOB 9.4.91R to MCOB 9.4.110R

Other information contained in the offer document

MCOB 6.4.13R

MCOB 5.6.122R

MCOB 9.4.126R

Offer documents in place of illustrations

MCOB 6.6.1R

MCOB 5.4 and MCOB 5.5

MCOB 5.4 and MCOB 5.5 as modified by MCOB 9

MCOB 9.5.3RRP

Table of rules in MCOB 6 replaced by rules in MCOB 9:

This table belongs to MCOB 9.5.1 R

Subject

Rule

Rule replaced by

Modifications to the illustration

MCOB 6.4.4R

MCOB 9.5.4R

MCOB 9.5.4RRP
The illustration provided as part of the offer document in accordance with MCOB 6.4.1 R(1) must meet the requirements of MCOB 9.4, with the following modifications:(1) the illustration must be suitably adapted and revised to reflect the fact that the firm is making an offer to a customer and updated to reflect changes to, for example, the interest rate, charges, the exchange rate or the APR required by MCOB 10 (Annual Percentage Rate) at the date the illustration is issued;(2)
MCOB 6.7.1RRP
(1) Where the regulated mortgage contract is for a business purpose, a firm may choose to provide a customer with a business offer document instead of the offer document referred to in MCOB 6.4.1 R.(2) If a firm provides a customer with a business offer document in accordance with (1), it must ensure that:(a) an updated business illustration, as required by MCOB 5.7 (Pre-application disclosure for business loans), forms part of the business offer document; and(b) subject to the
MCOB 6.7.2GRP
MCOB 6.7.1 R (2) means, for example, that the required text in MCOB 6.4.4 R (7) should be replaced by text that satisfies the requirements for business illustrations in MCOB 5.7.5 R
MCOB 9.8.5RRP
The illustration provided in accordance with MCOB 7.6.7 R must;(1) be based on the amount of the further advance only;(2) use the term 'additional borrowing' in place of the term 'lifetime mortgage' where appropriate throughout the titles and text of the illustration;(3) include an additional section headed: 'Total borrowing' and numbered '9' after Section 8, (with subsequent sections of the illustration renumbered accordingly) including the following text:(a) "This section gives
MCOB 9.8.7RRP
MCOB 9.4.18 R is replaced with the following: "Section 1: 'About this information' Under the section heading 'About this information', the following text must be included:"We are required by the Financial Services Authority (FSA) - the independent watchdog that regulates financial services - to provide you with this illustration. All firms selling lifetime mortgages are required to give illustrations, like this one, that contain similar information presented in the same way."
MCOB 9.8.9RRP
If a customer requests, or agrees to, a change to a regulated lifetime mortgage contract (other than a change as described in MCOB 7.6.7 R to MCOB 7.6.27 R (as modified by MCOB 9)) that changes the amount of each payment due (where payments are required), a firm must provide the customer with the following information, in a single communication, before the change takes effect:(1) the amount outstanding on the regulated lifetime mortgage contract at the date the change is requested;(2)
GEN 4.2.2GRP
There are other pre-contract information requirements outside this chapter, including:(1) for financial promotions, inCOB 3 (Financial promotion)(2) for designated investment business, inCOB 4.2 (Terms of business and client agreements with customers), COB 4.3 (Disclosing information about services, fees and commission - packaged products), COB 5.5 (Information about the firm), COB 6.1 to COB 6.5 (Product disclosure) and CASS (Client assets);(3) for non-investment insurance contracts3,
PERG 5.16.2GRP
Text of article 2.3 of the Insurance Mediation Directive"'Insurance mediation' means the activities of introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance, or of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim.These activities when undertaken by an insurance undertaking or an employee of an insurance undertaking who is acting under the
MCOB 6.1.6GRP
Firms may diverge from the requirements in MCOB 5.6 (Content of illustrations) where necessary to reflect the fact that they are providing an illustration for a variation as part of an offer document.
MCOB 6.2.1GRP
(1) MCOB 6 amplifies Principle 6 and Principle 7, which require a firm to pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading. The purpose of MCOB 6 is to ensure that a customer receives a clear offer document to enable him to check the features and price of theregulated mortgage contract before he enters into it. The offer document should include an updated and suitably adapted illustration
MCOB 7.2.1GRP
(1) This chapter amplifies Principle 6 and Principle 7, which require a firm to pay due regard to the information needs of its customers and to treat them fairly. (2) Where a firm provides services to a customer in relation to a further advance, rate switch, or addition or removal of a party to a regulated mortgage contract, this chapter also requires that the customer is provided with an illustration to make clear the price and features associated with that variation.1(3) This
MCOB 6.6.1RRP
If a firm provides a customer with an offer document in place of an illustration in accordance with MCOB 5.5.1 R (3), it must take reasonable steps to ensure that it provides the offer document in accordance with the requirements for providing an illustration in MCOB 5.4 (Illustrations: general) and MCOB 5.5 (Provision of illustrations).
PERG 5.15.4GRP

Types of activity – are they regulated activities and, if so, why?

Type of activity

Is it a regulated activity?

Rationale

MARKETING AND EFFECTING INTRODUCTIONS

Passive display of information -for example, medical insurance brochures in doctor’s surgery (whether or not remuneration is received for this activity)

No.

Merely displaying information does not constitute making arrangements under article 25(2) (see PERG 5.6.4 G).

Recommending a broker/insurance undertaking and providing customer with contact details (whether by phone, fax, e-mail, face-to-face or any other means of communication)

Yes, but article 72C may be available.

This will constitute making arrangements under article 25(2). But, the exclusion in article 72C will apply if all the intermediary does is supply information to the customer and the conditions of article 72C are otherwise met (see PERG 5.6.5 G to PERG 5.6.9 G). Generally, this will not amount to advice under article 53 unless there is an implied recommendation of a particular policy (see PERG 5.8.4 G), in which case article 72C would not be available.

Providing an insurance undertaking/broker with contact details of customer

Yes.

This will constitute making arrangements under article 25(2) when undertaken in the context of regular or ongoing arrangements for introducing customers. Article 72C will not apply because the information is supplied to someone other than the policyholder or potential policyholder.

Marketing on behalf of insurance undertaking to intermediaries only (for example, broker consultants)

Yes.

This amounts to work preparatory to the conclusion of contracts of insurance and so constitutes making arrangements under article 25(2). Article 72C is not available because this activity does not involve provision of information to the policyholder or potential policyholder only.

Telemarketing services (that is, companies specialising in marketing an insurance undertaking's products/services to prospective customers)

Yes.

This amounts to introducing and/or other work preparatory to the conclusion of contracts of insurance and so constitutes making arrangements under article 25(2). This could also involve article 25(1) arranging where the telemarketing company actually sells a particular policy and could involve advising on investments. Article 72C will not be available where the provision of information is more than incidental to the telemarketing company’s main business or where the telemarketing company is advising on investments.

PRE-PURCHASE DISCUSSIONS WITH CUSTOMERS AND ADVICE

Discussion with client about need for insurance generally/need to take out a particular type of insurance

Generally, no. Article 72C available if needed.

Not enough, of itself, to constitute making arrangements under article 25(2), but you should consider whether, viewed as a whole, your activities might amount to arranging. If so, article 72C might be of application (see PERG 5.6.5 G to PERG 5.6.9 G).

Advising on the level of cover needed

Generally, no. Article 72C available if needed.

Not enough, of itself, to constitute making arrangements under article 25(2), but you should consider whether, viewed as a whole, your activities might amount to making arrangements under article 25(2) (see PERG 5.8.3 G). If so, article 72C might be of application (see PERG 5.6.5 G to PERG 5.6.9 G).

Pre-purchase questioning in the context of filtered sales (intermediary asks a series of questions and then suggests several policies which suit the answers given)

Yes. Subject to article 72 C exclusion where available.

This will constitute arranging although article 72C may be of application (see PERG 5.6.5 G to PERG 5.6.9 G). If there is no express or implied recommendation of a particular policy, this activity will not amount to advice under article 53 (see PERG 5.8.15 G to PERG 5.8.19 G).

Explanation of the terms of a particular policy or comparison of the terms of different policies

Possibly. Article 72C available.

This is likely to amount to making arrangements under article 25(2). In certain circumstances, it could involve advising on investments (see PERG 5.8.8 G (Advice or information)). Where the explanation is provided to the potential policyholder, and does not involve advising on investments, article 72C may be of application (see PERG 5.6.5 G to PERG 5.6.9 G), and where information is provided by a professional in the course of a profession, article 67 may apply (see PERG 5.11.9 G to PERG 5.11.12 G).

Advising that a customer take out a particular policy

Yes.

This amounts to advice on the merits of a particular policy under article 53 (see PERG 5.8.4 G to PERG 5.8.5 G).

Advising that a customer does not take out a particular policy

Yes.

This amounts to advice on the merits of a particular policy under article 53 (see PERG 5.8.4 G to PERG 5.8.5 G).

Advice by journalists in newspapers, broadcasts etc.

Generally, no because of the article 54 exclusion.

Article 54 provides an exclusion for advice given in newspapers etc (see PERG 5.8.24 G to PERG 5.8.25 G).

Giving advice to a customer in relation to his buying a consumer product, where insurance is a compulsory secondary purchase and/or a benefit that comes with buying the product

Not necessarily but depends on the circumstances.

Where the advice relates specifically to the merits of the consumer product, it is possible that references to the accompanying insurance may be seen to be information and not advice. If, however, the advice relates, in part, to the merits of the insurance element, then it will be regulated activity.

ASSISTING CUSTOMERS WITH COMPLETING/SENDING APPLICATION FORMS

Providing information to customer who fills in application form

Possibly. Subject to article 67 or 72C exclusions where available.

This activity may amount to arranging although the exclusions in article 67 (see PERG 5.11.9 G to PERG 5.11.12 G) and article 72C (see PERG 5.6.5 G to PERG 5.6.9 G) may be of application.

Helping a potential policyholder fill in an application form

Yes.

This activity amounts to arranging. Article 72C will not apply because this activity goes beyond the mere provision of information to a policyholder or potential policyholder (see PERG 5.6.5 G to PERG 5.6.9 G).

Receiving completed proposal forms for checking and forwarding to an insurance undertaking (for example, an administration outsourcing service provider that receives and processes proposal forms)

Yes.

This amounts to arranging. Article 72C does not apply because this activity goes beyond the mere provision of information to a policyholder or potential policyholder (see PERG 5.6.5 G to PERG 5.6.9 G).

Assisting in completion of proposal form and sending to insurance undertaking

Yes.

This activity amounts to arranging. Article 72C does not apply because this activity goes beyond the mere provision of information (see PERG 5.6.5 G to PERG 5.6.9 G).

NEGOTIATING AND CONCLUDING CONTRACTS OF INSURANCE

Negotiating terms of policy on behalf of a customer with the insurance undertaking

Yes.

This activity amounts to arranging (see PERG 5.6.2 G).

Negotiating terms of policy on behalf of insurance undertaking with the customer and signing proposal form on his behalf

Yes.

These activities amount to both arranging and dealing in investments as agent.

Concluding a contract of insurance on insurance company’s behalf, for example, motor dealer who has authority to conclude insurance contract on behalf of insurance undertaking when selling a car

Yes.

A person carrying on this activity will be dealing in investments as agent. He will also be arranging (as the article 28 exclusion only applies in the limited circumstances envisaged under article 28(3)) (see PERG 5.6.12 G).

Agreeing, on behalf of a prospective policyholder, to buy a policy.

Yes.

A person who, with authority, enters into a contract of insurance on behalf of another is dealing in investments as agent under article 21, and will also be arranging.

Providing compulsory insurance as a secondary purchase

Yes. It will amount to dealing in investments as agent or arranging.

The fact that the insurance is secondary to the primary product does not alter the fact that arranging the package involves arranging the insurance.

COLLECTION OF PREMIUMS

Collection of cheque for premium from the customer at the pre-contract stage.

Yes (as part of arranging).

This activity is likely to form part of arranging. But the mere collection/receipt of premiums from the customer is unlikely, without more, to amount to arranging.

Collection of premiums at post-contract stage

No.

The mere collection of premiums from policyholders is unlikely, without more, to amount to assisting in the administration and performance of a contract of insurance.

MID-TERM ADJUSTMENTS AND ASSIGNMENTS

Solicitors or licensed conveyancers discharging client instructions to assign contracts of insurance.

Not where article 67 applies.

As the assignment of rights under a contract of insurance (as opposed to the creation of new contracts of insurance) does not fall within the IMD, article 67 is of potential application (see PERG 5.11.9 G to PERG 5.11.12 G).

Making mid-term adjustments to a policy, for example, property manager notifies changes to the names of the leaseholders registered as “interested parties” in the policy in respect of the property.

Yes.

Assuming the freeholder (as policyholder) is obliged under the terms of the policy to notify the insurance undertaking of changes to the identity of the leaseholders, the property manager is likely to be assisting in the administration and the performance of the contract of insurance.

TRADED ENDOWMENT POLICIES (“TEPs”)

Making introductions for the purposes of selling TEPs

Yes, unless article 72C applies.

Making introductions for these purposes is arranging unless article 72C applies (see PERG 5.6.5 G to PERG 5.6.9 G). The exclusions in article 29 (Arranging deals with or through authorised persons) and 33 (Introducing) no longer apply to arranging contracts of insurance.

Market makers in TEPs

Yes, although the exclusion in article 28 may apply.

Unauthorised market makers can continue to make use of the exclusions in articles 15 (Absence of holding out etc.) and 16 (Dealing in contractually based investments), where appropriate. In order to avoid the need for authorisation in respect of arranging they may be able to rely upon article 28 (see PERG 5.6.12 G).

ASSISTING POLICYHOLDER WITH MAKING A CLAIM

Merely providing information to the insured to help him complete a claim form

No.

Of itself, this is likely to amount to assisting in the administration but not the performance of a contract of insurance. In the FSA's view, the provision of information in these circumstances is more akin to facilitating performance of a contract of insurance rather than assisting in the performance (see PERG 5.7.3 G to PERG 5.7.5 G)

Completion of claim form on behalf of insured

Potentially.

This activity amounts to assisting in the administration of a contract of insurance. Whether this activity amounts to assisting in the administration and performance of a contract of insurance will depend upon whether a person's assistance in filling in a claims form is material to whether performance of the contractual obligation to notify a claim takes place (see PERG 5.7.2 G to PERG 5.7.3 G).

Notification of claim to insurance undertaking and helping negotiate its settlement on the policyholder's behalf

Yes.

This activity amounts to assisting in the administration and performance of a contract of insurance (see PERG 5.7.4 G).

ASSISTING INSURANCE UNDERTAKING WITH CLAIMS BY POLICYHOLDERS

Negotiation of settlement of claims on behalf of an insurance undertaking

No.

Claims management on behalf of an insurance undertaking does not amount to assisting in the administration and performance of a contract of insurance by virtue of the exclusion in article 39B (see PERG 5.7.7 G).

Providing information to an insurance undertaking in connection with its investigation or assessment of a claim

No.

This activity does not amount to assisting in the administration and performance of a contract of insurance.

Loss adjusters and claims management services (for example, by administration outsourcing providers)

Potentially.

These activities may amount to assisting in the administration and performance of a contract of insurance. Article 39B excludes these activities, however, when undertaken on behalf of an insurance undertaking only (see PERG 5.7.7 G).

Providing an expert appraisal of a claim

No.

This activity does not amount to assisting in the administration and performance of a contract of insurance whether carried out on behalf of an insurance undertaking or otherwise.

Jeweller repairs customer’s jewellery pursuant to a policy which permits the jeweller to carry out repairs

No.

This activity does not amount to assisting in the administration and performance of a contract of insurance. It amounts to managing claims on behalf of an insurance undertaking and so falls within the exclusion in article 39B (see PERG 5.7.7 G).

PERG 5.15.6GRP
Flow Chart: Introducers.
MCOB 7.7.1RRP
(1) Where, in relation to a regulated mortgage contract for a business purpose, a customer either:(a) seeks an immediate increase in the borrowing provided under the regulated mortgage contract; or(b) overdraws on the borrowing under the regulated mortgage contract;the further advance rules in MCOB 7.6.7 R to MCOB 7.6.17 R do not apply.(2) Where (1) applies, the firm must within five business days provide the customer with either:(a) a business illustration for the new total borrowing;