Conduct of Business Sourcebook (COBS) 22 Chapters
COBS1: APPLICATION - which firms cobs applies to. COBS2: BUSINESS OBLIGATIONS - firms must act honestly, fairly and professionally. COBS3: CLIENT CATEGORISATION - clients must be notified of their status as retail, professional or eligible counterparty. COBS4: COMMUNICATIONS WITH CLIENTS - clear, fair, not misleading. COBS5: DISTANCE COMMUNICATION - COBS6: FIRM INFORMATION - covers retail client costs & disclosure COBS7: INSURANCE MEDIATION - life insurance guidance COBS8: CLIENT AGREEMENTS - firms must enter into a written agreement with client COBS9: SUITABLITY - advice must be suitable COBS10:APPROPRIATENESS - must be suitable if client doesn't take advice COBS11:DEALING & MANAGING - executing orders on behalf of clients COBS12: INVESTMENT RESEARCH - managing investment conflict of interest COBS13: PREPARING PRODUCT INFORMATION - 'key features' documents COBS14: GIVING CLIENT INFORMATION - rules on information to be given to client pre-sale COBS15: CANCELLATION RIGHTS COBS16: REPORTING INFORMATION - need to supply clients with reports COBS17: INSURANCE CLAIMS HANDLING - long term care insurance COBS18: SPECIALIST REGIMES - provision for specialist companies COBS19: PENSIONS RULES COBS20: WITH PROFITS - life policy rules COBS21: PERMITTED LINKS FOR LONG TERM INSURANCE BUSINESS - where businesses are reliant on income from property value COBS22: RESTRICTIONS ON THE DISTRIBUTION OF CERTAIN REGULATORY CAPITAL INSTRUMENTS
Mortgage Conduct of Business (MCOB)
came as part of the 2014 Mortgage Martket Review. Non advised sales are NOT allowed. Advice must suit client affordability in present and future.
Suitability has 3 stages: 1. Whether a mortgage itself is suitable, 2. what type of mortgage is suitable, 3. selecting the best mortgage and provider to meet client needs
MCOB1: APPLICATION & PURPOSE - who the rules apply to
MCOB2: GENERAL CONDUCT STANDARDS - use of correct technology, clear communication
MCOB3: FINANCIAL PROMOTIONS - real time/ non real time (retained for 1 year after use)
MCOB4: ADVISING & SELLING STANDARDS - Initial disclosures, affordability records (3yrs)
MCOB5: PRE APPLICATION DISCLOSURE - details of mortgage before sale (interest, charges)
MCOB6: DISCLOSURE AT OFFER STAGE - based off mortgage illustration, state offer validity.
MCOB7: DISCLOSURE AT START OF CONTRACT - details of mortgage + annual statements
MCOB8+9:EQUITY RELEASE - for older customers to raise finance using their home
MCOB10: Annual Percentage Charge - for use of comparison
MCOB11: RESPONSIBLE LENDING - show they have taken into account ability to pay back
MCOB12: CHARGES - early/ late payment fees mustn't be excessive
MCOB13: ARREARS & REPOSSESSIONS - Must deal fairly, records must be kept, must try to reach an agreement, must send information within 15 days of falling into arrears.
MORTGAGE CREDIT DIRECTIVE (MCD)
EU Wide Framework, to ensure high levels of consumer protection to be implemented by 21 March 2016.
- Second Charge Loans and Buy to Let moved from CONC to MCOB which means business processes are more robust,
- Pre-application discloure stage now has a ESIS - European Standards Information Sheet (March 2019 implementation).
- Buyers are allowed a 7 day right of reflection to consider whether to proceed.
Regulation of General Insurance (ICOBS)
EU Directive on Insurance Mediation implemented in 2005, designed to standardise the market for insurance intermediaries.
The rules for intermediaries who sell, administer or advise on general insurance are in ICOBS - insurance conduct of business sourcebook.
The book is split into 8 sections.
ICOBS1 - Application
This outlines who is applies to - firms with retail commercial customers. Activities such as:
Insurance mediation, insurance contracts, communicating or approving financial promotion, underwriting (Lloyds Syndicate managing agent).
ICOBS2 - General Rules
POLICYHOLDERS - Anyone who is entitled to make a claim
CUSTOMERS - Anyone who make arrangements pre-contract of insurance. (Consumers: public outside of profession. Commercial: anyone not a consumer.
Also covers communications (clear, fair, not misleading); managing conflicts of interest (inducements); record keeping and 'exclusion of liability' (a firm mustn't restrict liability unless it has a reason).
ICOBS3 - Distance Communication
Complies with EU Distance Marketing Directive
Identity must be made clear during any distance communcation.
Must give contractual obligations and terms and conditions information in 'Pre-Contract Phase'
Consumer can get hold of contract terms upon request.
E-mails and Online activity must have the following information displayed clearly and easily:
Name, address, firm details, PRA/FCA register number, must be immediately identifiable.
Prices must be clear and fair.
ICOBS4 - Information about firm, services, and pay
A firm must provide a consumer with the following:
Name & Address
complaints procedure, whole/part of the market
Fees (Initial Disclosure Document)
Commission gained (upon request)
whether or not it is a pure reinsurer
whether or not a pure einsurer has more than 10% holding in the firm.
ICOBS5 - Identifying Client Needs & Advising
Must be sold a policy that benefits them
Must tell consumer if a policy doesn't cover part of their needs
Must disclose all material facts
Must specify reasons for the advice on being give a certain policy
A 'Statement of Demands & Needs' must be given to customer
Must take reasonable steps to ensure suitability, taking into account costs, fees, limitations and conditions or contract.
ICOBS6 - Product Information
Must give enough information for customer to make an informed choice, taking into account their knowledge, experience, the policy terms, associated products etc.
Cover documents must be given promply after policy inception.
Insurance company must supply intermediary with this information, or direct to customer.
Information disclosed 'pre-contract' must detail right to cancel.
Before a pure protection contract is concluded a firm must provide the customer with:
Legal name of insurance firm
Address of Head Office
Contract terms, benefit definitions
How to terminate contract
How to pay, and the duration of premiums
Tax arrangements for any benefits under policy
Cancellation information and how to handle complaints
ICOBS7 - Cancellation
The consumer has a right to cancel (without penalty) within:
30 days for insurance that has elements of pure protection or payment protection
14 days for any other contract of insurance or distance contract
Although this right does not apply to travel policies (less that one month), completed policies, pure protection policies of 6 months or less, pure protection effected by trustees of occupational pension scheme, or employers, for benefit of employees, general insurance sold by an intermediary.
ICOBS8 - Claims Handling
Insurance company must ensure ruled are complied with, promptly and fairly, giving guidance to help make a claim. They must not unreasonable reject a claim:
For non disclosure of facts which could not be reasonably expected to disclose
For misrepresentation of material fact
Breach of contract unless circumstances are connected to the breach
Banking Conduct of Business (BCOBS)
BCOBS and Payment Service Regulation (as a result of EU Payment Services Directive) came into effect Nov 2009. It's a principles based regulation for deposit taking business.
Areas not covered by BCOBS are addressed by Standards of Lending Practice.
The FCA deemed it neccessary to take control of this, as no one organisation had clear accountability. This means Treating Customers Fairly applied to banking. This has helped bolster public confidence in the banks after them failing.
BCOBS: APPLICATION - who this books applies to
BCOBS2: COMMUNICATION REGARDING PROMOTIONS - clear, fair, not misleading
BCOBS2A: OPTIONAL ADDITIONAL PRODUCTS - rules for payable extra products marketing
BCOBS3: DISTANCE COMMUNICATION/ E-COMMERCE - for UK/ EU Consumers
BCOBS4: INFORMATION TO BE COMMUNICATED - first must provide account information
BCOBS5: POST-SALE REQUIREMENTS - service must be prompt, efficient and fair
BCOBS6: CANCELLATION - sets out customers rights to cancel in varying situations
Payment Systems Regulations 2015
"Making payment systems work well for those that use them".
PSRs payment systems regulations cover most payment services, where access to funds is not restricted e.g banks, building societies, non-bank card/cheque issuers, e-money issuers etc.
New class of regulated firms: Payment Institutions (PIs). extra prudential requirements.
PSR oversees all domestic payments providers with the following general powers:
Authority over system rules. Authority to give direction to participants. Require access to payment systems. Require owners of payments systems to disclose information.
The can publish details of compliance failure and impose financial penalty if needed.
PSR also has Competition Act powers, so dual runs alongside CMA.
BoE oversees inter-bank payment systems, under Banking Act 2009