COBS 6

Information about the firm, its services and remuneration

COBS 6.1

Information about the firm and compensation information

Application

COBS 6.1.1

See Notes

handbook-rule
  1. (1) This section applies to a firm that carries on designated investment business for:
    1. (a) a retail client; and
    2. (b) in the case of MiFID or equivalent third country business, a client.
  2. (2) If expressly provided, this section also applies to ancillary services not covered by (1), but only in the course of MiFID or equivalent third country business carried on with or for a client.

COBS 6.1.2

See Notes

handbook-rule
If a firm provides basic advice on stakeholder products in accordance with the basic advice rules, this section does not apply to that service.

COBS 6.1.3

See Notes

handbook-guidance
This section imposes requirements relating to disclosure of information to clients that are additional to the general requirement in COBS 2.2.

Information about a firm and its services

COBS 6.1.4

See Notes

handbook-rule

A firm must provide a retail client with the following general information, if relevant:

  1. (1) the name and address of the firm, and the contact details necessary to enable a client to communicate effectively with the firm;
  2. (2) in the case of MiFID or equivalent third country business, the languages in which the client may communicate with the firm, and receive documents and other information from the firm;
  3. (3) the methods of communication to be used between the firm and the client including, where relevant, those for the sending and reception of orders;
  4. (4) a statement of the fact that the firm is authorised and the name of the competent authority that has authorised it;
  5. (5) in the case of MiFID or equivalent third country business, the contact address of the competent authority that has authorised the firm;
  6. (6) if the firm is acting through an appointed representative or, where applicable, a tied agent, a statement of this fact specifying the EEA State in which that appointed representative or tied agent is registered;
  7. (7) the nature, frequency and timing of the reports on the performance of the service to be provided by the firm to the client in accordance with the rules on reporting to clients on the provision of services (COBS 16);
  8. (8)
    1. (a) in the case of a common platform firm, a description, which may be provided in summary form, of the conflicts of interest policy;
    2. (b) other than in the case of a common platform firm, when a material interest or conflict of interest may or does arise, the manner in which the firm will ensure fair treatment of the client;
  9. (9) in the case of a common platform firm, at any time that the client requests it, further details of the conflicts of interest policy.

[Note: article 30(1) of the MiFID implementing Directive]

COBS 6.1.5

See Notes

handbook-guidance
A firm disclosing details of its authorisation should refer to the appropriate forms of words set out in GEN 4 Annex 1 R.

COBS 6.1.6

See Notes

handbook-rule
  1. (1) A firm that manages investments for a client must establish an appropriate method of evaluation and comparison such as a meaningful benchmark, based on the investment objectives of the client and the types of designated investments included in the client portfolio, so as to enable the client to assess the firm's performance.
  2. (2) If a firm proposes to manage investments for a retail client, the firm must provide the client with such of the following information as is applicable:
    1. (a) information on the method and frequency of valuation of the designated investments in the client portfolio;
    2. (b) details of any delegation of the discretionary management of all or part of the designated investments or funds in the client portfolio;
    3. (c) a specification of any benchmark against which the performance of the client portfolio will be compared;
    4. (d) the types of designated investments that may be included in the client portfolio and types of transaction that may be carried out in those designated investments, including any limits; and
    5. (e) the management objectives, the level of risk to be reflected in the manager's exercise of discretion, and any specific constraints on that discretion.

[Note: articles 30(2) and (3) of the MiFID implementing Directive]

Information concerning safeguarding of designated investments belonging to clients and client money

COBS 6.1.7

See Notes

handbook-rule
  1. (1) A firm that holds designated investments or client money for a retail client subject to the MiFID custody chapter or the MiFID client money chapter and any third country investment firm that holds designated investments or client money for a retail client must provide that client with the following information:
    1. (a) if applicable,
      1. (i) that the designated investments or client money of that client may be held by a third party on behalf of the firm;
      2. (ii) the responsibility of the firm under the applicable national law for any acts or omissions of the third party; and
      3. (iii) the consequences for the client of the insolvency of the third party;
    2. (b) if applicable, that the designated investments belonging to the retail client may be held in an omnibus account by a third party and a prominent warning of the resulting risks;
    3. (c) if it is not possible under national law for designated investments belonging to a client held with a third party to be separately identifiable from the proprietary designated investments of that third party or of the firm, that fact and a prominent warning of the resulting risks;
    4. (d) if applicable, that accounts that contain designated investments or client money belonging to that client are or will be subject to the law of a jurisdiction other than that of a EEA State, an indication that the rights of the client relating to those instruments or money may differ accordingly;
    5. (e) a summary description of the steps which it takes to ensure the protection of any designated investments belonging to the client or client money it holds, including summary details of any relevant investor compensation or deposit guarantee scheme which applies to the firm by virtue of its activities in an EEA State.
  2. (2) A firm that holds designated investments or client money for a retail client must inform the client:
    1. (a) if applicable, about the existence and the terms of any security interest or lien which the firm has or may have over the client's designated investments or client money, or any right of set-off it holds in relation to the client's designated investments or client money; and
    2. (b) if applicable, that a depositary may have a security interest or lien over, or right of set-off in relation to those instruments or money.
  3. (3) A firm within (1) must also, before entering into securities financing transactions in relation to designated investments held by it on behalf of a retail client, or before otherwise using such designated investments for its own account or the account of another client, in good time before the use of those designated investments provide the client, in a durable medium, with clear, full and accurate information on the obligations and responsibilities of the firm with respect to the use of those designated investments, including the terms for their restitution, and on the risks involved.
  4. (4) A firm within (1) that holds client designated investments or client money for a professional client must provide that client with the information in paragraphs (1)(d) and (2)(a) and(b).

[Note: articles 29(3), 30(1)(g) and 32 of the MiFID implementing Directive]

COBS 6.1.8

See Notes

handbook-guidance
Paragraphs (1), (3) and (4) of COBS 6.1.7 R apply in relation to MiFID or equivalent third country business and also to firms that have elected to comply with the custody rules in the MiFID custody chapter or the client money rules in the MiFID client money chapter.

Information about costs and associated charges

COBS 6.1.9

See Notes

handbook-rule

A firm must provide a retail client with information on costs and associated charges including, if applicable:

  1. (1) the total price to be paid by the client in connection with the designated investment or the designated investment business or ancillary services, including all related fees, commissions, charges and expenses, and all taxes payable via the firm or, if an exact price cannot be indicated, the basis for the calculation of the total price so that the client can verify it. The commissions charged by the firm must be itemised separately in every case;
  2. (2) if any part of the total price referred to (1) is to be paid in or represents an amount of foreign currency, an indication of the currency involved and the applicable currency conversion rates and costs;
  3. (3) notice of the possibility that other costs, including taxes, related to transactions in connection with the designated investment or the designated investment business may arise for the client that are not paid via the firm or imposed by it; and
  4. (4) the arrangements for payment or other performance.

[Note: article 33 of the MiFID implementing Directive]

COBS 6.1.10

See Notes

handbook-guidance
The rules on inducements in COBS 2.3 may also require a firm to disclose information to a client in relation to benefits provided to the firm.

Timing of disclosure

COBS 6.1.11

See Notes

handbook-rule
  1. (1) A firm must provide a client with the information required by this section in good time before the provision of designated investment business or ancillary services unless otherwise provided by this rule.
  2. (2) A firm may instead provide that information immediately after starting to provide designated investment business or ancillary services if:
    1. (a) the firm was unable to comply with (1) because, at the request of the client, the agreement was concluded using a means of distance communication which prevented the firm from doing so; and
    2. (b) in any case where the rule on voice telephony communications (COBS 5.1.12 R) does not otherwise apply, the firm complies with that rule in relation to the retail client, as if that client were a consumer.

[Note: article 29(2), 29(3) and 29(5) of the MiFID implementing Directive]

COBS 6.1.12

See Notes

handbook-guidance
A firm should take into account COBS 8.1.3 R (1), which requires earlier disclosure of some items of information covered in this section.

Medium of disclosure

COBS 6.1.13

See Notes

handbook-rule

Except where expressly provided, a firm must provide the information required by this section in a durable medium or via a website (where it does not constitute a durable medium) where the website conditions are satisfied.

[Note: article 29(4) of the MiFID implementing Directive]

Keeping the client up to date

COBS 6.1.14

See Notes

handbook-rule
  1. (1) A firm must notify a client in good time about any material change to the information provided under this section which is relevant to a service that the firm is providing to that client.
  2. (2) A firm must provide this notification in a durable medium if the information to which it relates was given in a durable medium.

[Note: article 29(6) of the MiFID implementing Directive]

Existing clients

COBS 6.1.15

See Notes

handbook-guidance
  1. (1) A firm need not treat each of several transactions in respect of the same type of financial instrument as a new or different service and so does not need to comply with the disclosure rules in this chapter in relation to each transaction.
  2. [Note: recital 50 to the MiFID implementing Directive]
  3. (2) But a firm should ensure that the client has received all relevant information in relation to a subsequent transaction, such as details of product charges that differ from those disclosed in respect of a previous transaction.

Compensation information

COBS 6.1.16

See Notes

handbook-rule
  1. (1) A firm carrying on MiFID business must make available to a client, who has used or intends to use those services, information necessary for the identification of the compensation scheme or any other investor-compensation scheme of which the firm is a member (including, if relevant, membership through a branch) or any alternative arrangement provided for in accordance with the Investor Compensation Directive.
  2. (2) The information under (1) must include the amount and scope of the cover offered by the compensation scheme and any rules laid down by the EEA State pursuant to article 2 (3) of the Investor Compensation Directive.
  3. (3) A firm must provide, on the client's request, information concerning the conditions governing compensation and the formalities which must be completed to obtain compensation.
  4. (4) The information provided for in this rule must be made available in a durable medium or via a website if the website conditions are satisfied in the official language or languages of the EEA State.

[Note: article 10(1) and (2) of the Investor Compensation Directive]

Record keeping: information about the firm and compensation information

COBS 6.1.17

See Notes

handbook-guidance
Firms are reminded of the general record-keeping requirements in SYSC 3.2 and SYSC 9.

COBS 6.2

Describing the breadth of a firm's personal recommendations

Application and introduction

COBS 6.2.1

See Notes

handbook-rule
This section applies to a firm which makes a personal recommendation to a retail client to buy a packaged product.

COBS 6.2.2

See Notes

handbook-rule
This section does not apply if a firm gives basic advice in accordance with the basic advice rules.

COBS 6.2.3

See Notes

handbook-guidance

Under the territorial application rules in COBS 1, the rules in this section apply to:

  1. (1) a UK firm's business carried on from an establishment in an EEA State other than the United Kingdom for a retail client in the United Kingdom unless, the office from which the activity is carried on were a separate person, the activity:
    1. (a) would fall within the overseas persons exclusion in article 72 of the Regulated Activities Order; or
    2. (b) would not be regarded as carried on in the United Kingdom;
  2. (2) a firm's business carried on from an establishment in the United Kingdom carried on for a client in another EEA state.

COBS 6.2.4

See Notes

handbook-guidance
A firm's scope of advice relates to the product providers whose products it sells. Its range relates to which products from those providers it sells.

COBS 6.2.5

See Notes

handbook-guidance
A firm may operate on the basis of recommending only a subset of the packaged products (its range) selected from the product providers within its scope.

COBS 6.2.6

See Notes

handbook-guidance

In order to comply with the rule on information disclosure before providing services (COBS 2.2.1R (1)(a)) and, if applicable, the rule on information to be provided by an insurance intermediary (COBS 7.2.1 R (2)) a firm's disclosures to a client should include whether it expects its scope to be:

  1. (1) the whole of the market;
  2. (2) limited to several product providers;
  3. (3) limited to a single product provider.

COBS 6.2.7

See Notes

handbook-guidance
In order to comply with the rule on providing the details of insurance undertakings (COBS 7.2.1 R (3)) a firm should make a record appropriate for distribution to a client of the names of the insurance undertakings with which the firm conducts, or may conduct, business.

COBS 6.2.8

See Notes

handbook-guidance
  1. (1) If a firm holds itself out as independent or as otherwise giving personal recommendations to retail clients on packaged products from the whole market (or the whole of any sector of that market), the firm's selection for this purpose will need to be sufficiently large to satisfy the client's best interests rule and the fair, clear and not misleading rule.
  2. (2) A firm that gives personal recommendations on packaged products from the whole of a sector of the market may hold itself out as giving personal recommendations from the whole of that sector.

COBS 6.2.9

See Notes

handbook-guidance
A firm may use "panels" of product providers which are sufficient for the purpose of giving recommendations from the whole market and which are reviewed on a regular basis. A firm which provides personal recommendations from the whole market should ensure that its analysis of the market and the available packaged products is kept adequately up to date.

COBS 6.2.10

See Notes

handbook-rule
A firm must not hold itself out as providing personal recommendations from the whole market on any type of personal pension scheme unless its advice is based on all types of personal pension schemes, including SIPPs.

Selling products from the scope and range

COBS 6.2.11

See Notes

handbook-guidance

In accordance with the client's best interests rule and the fair, clear and not misleading rule, a firm should not describe its services to a retail client as being based on a particular scope of advice and range unless its business processes are designed to ensure that:

  1. (1) its representatives consider, based on adequate knowledge, products from across that scope and range before making a personal recommendation;
  2. (2) it does not recommend products that are not in its scope or range;
  3. (3) each of its representatives who advise on packaged products is able to recommend and sell each product within the relevant range. However it may use a representative who is not competent to advise on and sell a product or category of product within the range if it:
    1. (a) prevents that representative from recommending that product or category of product; and
    2. (b) ensures that if a product ought to be recommended to a client, that client is referred to a representative that is competent to recommend it;
  4. (4) it does not narrow the scope it provides to a client compared with the scope it has disclosed to that client;
  5. (5) it does not alter the scope or range (where permitted under (4)) compared to the scope it has disclosed to a retail client without making a subsequent disclosure of its scope or range with appropriate content, presented with sufficient prominence, and in an appropriate format; and
  6. (6) it does not extend the scope or range in a way that materially alters its remuneration arrangements unless it provides to the client new and appropriate information on inducements, costs and charges (a firm may do this by providing a further services and costs disclosure document or combined initial disclosure document).

Records of scope and range

COBS 6.2.12

See Notes

handbook-rule
  1. (1) A firm must make, and keep up to date, a record of the scope (or scopes) and the range (or ranges) it will use.
  2. (2) A firm must maintain a record of the particular scope and range on which its personal recommendation to each retail client is based.
  3. (3)
    1. (a) The record of the firm's scope and range (or ranges) must be retained for five years from the date on which it was superseded by a more up-to-date record.
    2. (b) The client-specific record required by (2) must be retained for five years from the date of the provision of the personal recommendation.

COBS 6.2.13

See Notes

handbook-guidance
In the case of a firm whose only scope is the selection of packaged products from the whole of the market (or from the whole of a sector of the market), it will be sufficient if the firm's record simply confirms that the personal recommendations it provides are given on this basis (and in the case of a firm which provides personal recommendations on the whole of a sector of the market, confirms the nature and parameters of that sector).

Remuneration structure and referrals

COBS 6.2.14

See Notes

handbook-guidance
In determining the remuneration structure of its representatives, a firm should manage any tensions between its obligations to its clients and the personal interests of its representatives (see SYSC 3A.6.2 G and SYSC 10.1.3 R).

Firms holding themselves out as independent

COBS 6.2.15

See Notes

handbook-rule
  1. (1) A firm must not hold itself out to a client as acting independently unless it intends to:
    1. (a) provide personal recommendations to that client on packaged products from the whole market (or the whole of a sector of the market); and
    2. (b) offers the client the opportunity of paying a fee for the provision of such advice.
  2. (2) Paragraph (1) does not apply to group personal pension schemes if a firm discloses information to a client in accordance with the rule on group personal pension schemes (COBS 6.3.21 R).

COBS 6.2.16

See Notes

handbook-rule
  1. (1) A firm which charges a retail client a fee under COBS 6.2.15R (1)(b) must do so on the basis that it will, in respect of any commission which it receives in respect of transactions in packaged products for that client (and to which the particular fee charging arrangement relates), ensure the value of that commission is transferred to the client.
  2. (2) This rule does not prohibit such a firm from agreeing with the client (in writing) that it will retain an amount or rate of trail or renewal commission up to an amount each year specified in the agreement and so small, relative to the overall amount of fees paid by the client, that it would be manifestly disproportionate for the firm to be required to account to the client in one of the ways outlined in this rule.

COBS 6.2.17

See Notes

handbook-guidance
A firm that carries on business in relation to a combination of packaged products, regulated mortgage contracts and home reversion plans can do so in relation to the whole market and therefore be "independent" for one but offer only a limited service for the others. If this is the case, the firm should explain the different nature of the services in a way which complies with the fair, clear and not misleading rule. (See also MCOB.)

COBS 6.2.18

See Notes

handbook-guidance
The rule on independence means that a firm wishing to hold itself out as independent will need to give clients a purely fee based option for paying for its services. Such a fee may be offered on a contingent basis so that it does not become payable if the client does not acquire a product. A firm offering a fee-based service may, in addition, provide the client with other payment options, such as by commission, or by a combination of fee and commission.

COBS 6.2.19

See Notes

handbook-guidance
A firm that holds itself out as independent should consider whether any ownership by it of shares in a product provider or by a product provider in it, or any loan agreements with a product provider, should be disclosed in order to meet the fair, clear and not misleading rule.

COBS 6.3

Disclosing information about services, fees and commission - packaged products

Application

COBS 6.3.1

See Notes

handbook-rule
This 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 6.3.2

See Notes

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

Disclosure to retail clients in good time

COBS 6.3.3

See Notes

handbook-guidance
  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 may comply with them by ensuring that in good time before:
    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) (in relation to the amendment of a life policy for that retail client) it gives a personal recommendation in relation to packaged products;
  2. its representative provides the client with a services and costs disclosure document or combined initial disclosure document.
  3. (2) A firm should consider the extent to which it is appropriate to provide a services and costs disclosure document or a combined initial disclosure document if the appropriate information has been given to the client on a previous occasion and the information is still accurate and appropriate for the client.
  4. (3) A firm should provide the information required by this section in a durable medium.
  5. (4) For the purposes of (1), provision of a services and costs disclosure document or combined initial disclosure document will comply with:
    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;
    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 are actual hourly rates rather than indicative hourly rates;
    3. (c) the rule on information disclosure before providing services (COBS 2.2.1R (1)(a) and COBS 2.2.1R (1)(d));
    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;
    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);
    6. (f) the investor compensation scheme rule in COBS 6.1.16R (1) and (2); and
    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)).
  6. (5) [deleted]
    1. (a) [deleted]
    2. (b) [deleted]
    3. (c) [deleted]
    4. (d) [deleted]
    5. (e) [deleted]

COBS 6.3.4

See Notes

handbook-rule
For the purposes of GEN 5, a firm may not use the keyfacts 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 combined initial disclosure document produced in accordance with the templates and Notes in the annexes to this chapter.

COBS 6.3.5

See Notes

handbook-guidance
Each of the services and costs disclosure document and 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.

COBS 6.3.6

See Notes

handbook-guidance
  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. (2) [deleted]

Services and costs disclosure document and combined initial disclosure document

COBS 6.3.7

See Notes

handbook-guidance
  1. (1) A services and costs disclosure document is a document that contains the keyfacts logo, headings and text in the order shown in COBS 6 Annex 1 and in accordance with the Notes.
  2. (2) A combined initial disclosure document is a document that contains the keyfacts logo, headings and text in the order shown in COBS 6 Annex 2 and in accordance with the Notes.

COBS 6.3.8

See Notes

handbook-guidance

A firm may include, in a services and costs disclosure document or a combined initial disclosure document, 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, if the information would be sufficiently prominent. For example, a firm may wish to use those documents to satisfy:

  1. (1) the parts of the rule on information about the firm and its services (COBS 6.1.4 R);
  2. (2) the rule on costs and associated charges (COBS 6.1.9 R);
  3. (3) the items of distance marketing information described in paragraphs (6), (8), (10) and (11) of COBS 5 Annex 1 R;

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

COBS 6.3.9

See Notes

handbook-guidance
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. A firm may produce its services and costs disclosure document or combined initial disclosure document by using its own house style and brand. Electronic tools to help firms to construct their own versions of these documents are available from the FSA website.

COBS 6.3.10

See Notes

handbook-guidance
  1. (1) [deleted]
  2. (2) [deleted]

COBS 6.3.11

See Notes

handbook-rule
  1. (1) [deleted]
  2. (2) [deleted]

COBS 6.3.12

See Notes

handbook-guidance

[deleted]

  1. (1) [deleted]
  2. (2) [deleted]
  3. (3) [deleted]

COBS 6.3.13

See Notes

handbook-guidance
If a firm is asked to provide a menu by a person with whom the firm has had no prior contact it may provide the menu which is appropriate for its typical or most prevalent client type and the business it conducts with them.

COBS 6.3.14

See Notes

handbook-guidance

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

  1. (1) the services and costs disclosure document or the combined initial disclosure document that it provided initially did not reflect relevant expected commission arrangements; or
  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.

COBS 6.3.15

See Notes

handbook-guidance
Long-term care and whole of life policies, for which the example given in the menu refers to the age of the policyholder, are deemed to have a term equal to the difference between the age of the policyholder (at the time that the policy is taken out) and the age of 85.

COBS 6.3.16

See Notes

handbook-guidance
If a firm decides to provide a retail client with a personal recommendation on a type of packaged product which falls within a product group specified in Notes 14 or 19 to COBS 6 Annex 3 in relation to which the menu previously given to the client does not contain the information described in the menu, it should issue a new and appropriate menu to that client.

Provision of information on request

COBS 6.3.17

See Notes

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

COBS 6.3.18

See Notes

handbook-guidance
  1. (1) [deleted]
  2. (2)
    1. (a) [deleted]
      1. (i) [deleted]
      2. (ii) [deleted]
    2. (b) [deleted]

Telephone sales

COBS 6.3.19

See Notes

handbook-guidance
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 contracts (see COBS 5).

COBS 6.3.20

See Notes

handbook-guidance
  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 products from the whole market or from a limited number of companies or from a single company or a single group of companies;
    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, it should consider sending the client the document as soon as is reasonably practicable following the conclusion of the call.

Group Personal Pensions

COBS 6.3.21

See Notes

handbook-rule

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 6.3.22

See Notes

handbook-guidance

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.

COBS 6.4

Disclosure of charges, remuneration and commission

Application

COBS 6.4.1

See Notes

handbook-rule
This section applies to a firm carrying on designated investment business with a retail client.

COBS 6.4.2

See Notes

handbook-guidance

Under the territorial application rules in COBS 1, the rules in this section apply to:

  1. (1) a UK firm's business carried on from an establishment in an EEA State other than the United Kingdom for a retail client in the United Kingdom unless, if the office from which the activity is carried on were a separate person, the activity:
    1. (a) would fall within the overseas persons exclusion in article 72 of the Regulated Activities Order; or
    2. (b) would not be regarded as carried on in the United Kingdom.
  2. (2) a firm's business carried on from an establishment in the United Kingdom carried on for a client in an other EEA state.

Disclosure of commission (or equivalent) for packaged products

COBS 6.4.3

See Notes

handbook-rule
  1. (1) If a firm sells, personally recommends or arranges the sale of a packaged product to a retail client, and subsequently if the retail client requests it, the firm must disclose to the client in cash terms:
    1. (a) any commission receivable by it or any of its associates in connection with the transaction;
    2. (b) if the firm is also the product provider, any commission or commission equivalent payable in connection with the transaction; and
    3. (c) if the firm or any of its associates is in the same immediate group as the product provider, any commission equivalent in connection with the transaction.
  2. (2) Disclosure "in cash terms" in relation to commission does not include the value of any indirect benefits listed in the table at COBS 2.3.15 G.
  3. (3) In determining the amount to be disclosed as commission equivalent, a firm must put a proper value on the cash payments, benefits and services provided to its representatives in connection with the transaction.
  4. (4) This rule does not apply if:
    1. (a) the firm is acting as an investment manager; or
    2. (b) the retail client is not present in the EEA at the time of the transaction; or
    3. (c) the firm provides the client with a key features document or a simplified prospectus, in accordance with COBS 14, provided that the firm discloses to the client the actual amount or value of commission or equivalent within five business days of effecting the transaction.
  5. (5) If the terms of a packaged product are varied in a way that results in a material increase in commission or commission equivalent, a firm must disclose to a retail client in writing any consequent increase in commission or equivalent receivable by it in relation to that transaction.

COBS 6.4.4

See Notes

handbook-guidance
Where a firm is required to disclose the value of commission equivalent, the value will be at least as high as the amount of any commission.

COBS 6.4.5

See Notes

handbook-rule
  1. (1) A firm must make the disclosure required by the rule on disclosure of commission or equivalent (COBS 6.4.3 R) as close as practicable to the time that it sells, personally recommends or arranges the sale of a packaged product.
  2. (2) The firm must make the disclosure:
    1. (a) in a durable medium; or
    2. (b) when a retail client does not make a written application to enter into a transaction, orally. In these circumstances, the firm must give written confirmation as soon as possible after the date of the transaction, and in any event within five business days.

COBS 6.4.6

See Notes

handbook-evidential-provisions
  1. (1) When determining the value of cash payments, benefits and services under the rule on disclosure of commission equivalent (COBS 6.4.3 R), a firm should follow the provisions of COBS 6 Annex 6.
  2. (2) Compliance with this evidential provision may be relied on as tending to establish compliance with COBS 6.4.3 R; and
  3. (3) Contravention of this evidential provision may be relied on as tending to establish contravention of COBS 6.4.3 R.

Guidance on disclosure requirements for packaged products.

COBS 6.4.7

See Notes

handbook-rule

A firm must not enter into an arrangement to pay commission other than to the firm responsible for a sale, unless:

  1. (1) the firm responsible for the sale has passed on its right to receive the commission to the recipient; or
  2. (2) another firm has given a personal recommendation to the same retail client after the sale; or
  3. (3) the commission is paid following the sale of a packaged product by the firm in response to a financial promotion communicated by that firm to a client of the recipient firm; or
  4. (4) the arrangement is with a firm in the same immediate group.

COBS 6.4.8

See Notes

handbook-guidance
A disclosure made under this section should indicate the timing of any payment. For example, if a firm exchanges its right to future commission payments for a lump sum, whether by way of a loan or other commercial arrangement, it should disclose the amount of commission receivable by it that has been exchanged for the lump sum.

COBS 6.4.9

See Notes

handbook-guidance
The rules in this section build on the disclosure of fees, commissions and non-monetary benefits made under the rule on inducements (COBS 2.3.1 R). However the rules in this section do not require disclosures before the firm makes a personal recommendation.

COBS 6.4.10

See Notes

handbook-guidance
If the precise rate or value of commission or equivalent is not known in advance, the firm should estimate the rate likely to apply to the representative in respect of the transaction.

COBS 6.4.11

See Notes

handbook-guidance

COBS 6 Annex 1

Services and costs disclosure document described in COBS 6.3.7G(1)

See Notes

handbook-guidance
Firms should omit the notes and square brackets which appear in the following specimen.

Services and costs disclosure document described in COBS 6.3.7G(1) - COBS 6 Annex 1

COBS 6 Annex 2

Combined initial disclosure document described in COBS 6.3, ICOBS 4.5, MCOB 4.4.1R(1) and MCOB 4.10.2R(1)

This specimen covers services in relation to packaged products, non-investment insurance contracts and home finance transactions (including equity release transactions).

If the firm is not providing services in relation to all products, the parts of the combined initial disclosure document that are not relevant should be omitted.

Firms should omit the notes and square brackets that appear in the following combined initial disclosure document. The completed combined initial disclosure document should contain the keyfacts logo, headings and text in the order shown and in accordance with the notes. Subject to this, a firm may use its own house style and brand.

COBS 6 Annex 2: Combined initial disclosure document described in COBS 6.3, ICOBS 4.5, MCOB 4.4.1R(1) and MCOB 4.10.2R(1) - COBS 6 Annex 2

COBS 6 Annex 3

(Menu described in COBS 6.3)

COBS 6 Annex 4

Identifying and describing the maximum rate of commission (or equivalent), the market average and the Example

COBS 6 Annex 5

Calculation of a maximum rate of commission

COBS 6 Annex 6

Calculating commission equivalent

See Notes

handbook-evidential-provisions
This table forms part of COBS 6.4.6 E.