MCOB Mortgages and Home Finance: Conduct of Business sourcebook

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MCOB 1

Application and purpose

MCOB 1.1

Application and purpose

01/12/2004

Application

MCOB 1.1.1

MCOB applies as described in this chapter.

31/10/2004

Purpose

MCOB 1.1.2

The purpose of this chapter is to set out to whom, for what activities, and within what territorial limits the rules, evidential provisions and guidance in MCOB apply.

06/04/2007
Past version of MCOB 1.1.2 before 06/04/2007

MCOB 1.2

General application: who? what?

01/12/2004

MCOB 1.2.1

(1) This sourcebook applies to every firm that:

(a) carries on a home finance activity (subject to the business loan application provisions); or
(b) communicates or approves a financial promotion of qualifying credit, of a home purchase plan, of a home reversion plan or of a regulated sale and rent back agreement.

(2) Where a firm has outsourced activities to a third party processor, any rule in MCOB which requires the third party processor, when acting as such, to disclose its identity to a customer must be read as requiring disclosure of the identity of the firm (or appointed representative, as appropriate) which is taking responsibility for the acts and omissions of the third party processor when carrying on the outsourced activities.

30/06/2010
Past version of MCOB 1.2.1 before 30/06/2010

MCOB 1.2.1A

Firms which outsource regulated activities are reminded of the guidance on outsourcing in SYSC 3.2.4 G and SYSC 8.

01/01/2007
Past version of MCOB 1.2.1A before 01/01/2007

Firm types and the home finance activities

MCOB 1.2.2

(1) This sourcebook applies to activities carried out in respect of four types of product: regulated mortgage contracts (which includes lifetime mortgages), home purchase plans, home reversion plans and regulated sale and rent back agreements. Together, these products are referred to as home finance transactions.
(2) Lifetime mortgages and home reversion plans are together referred to as equity release transactions.
(3) The application of most of this sourcebook is expressed by reference to four types of firm: lenders/providers, administrators, arrangers, and advisers. Arrangers and advisers are together referred to as intermediaries. This includes those firms that provide business loans to customers under a regulated mortgage contracts (see MCOB 1.2.3 R to MCOB 1.2.9 G). A single firm may fall into more than one of these types. PERG 4 contains detailed guidance on regulated mortgage activities and PERG 14 contains detailed guidance on home purchase activities, reversion activities and regulated sale and rent back activities.

30/06/2010
Past version of MCOB 1.2.2 before 30/06/2010

Business loans: application of MCOB

MCOB 1.2.3

In relation to a regulated mortgage contract for a business purpose

(1) MCOB applies if the customer is not a large business customer; and
(2) if MCOB applies, a firm must either:

(a) comply with MCOB in full (disregarding the tailored provisions for regulated mortgage contracts for a business purpose in the remainder of MCOB); or
(b) comply with MCOB taking account of those tailored provisions, including MCOB 1.2.7 R.

31/10/2004

MCOB 1.2.4

For detail of the tailored provisions applying, see the section on 'business loans' set out in each relevant chapter.

06/04/2007
Past version of MCOB 1.2.4 before 06/04/2007

MCOB 1.2.5

(1) In order for a loan to fall within the definition of a regulated mortgage contract, at least 40% of the total of the land to be given as security must be used as or in connection with a dwelling. Therefore, the variation in approach provided for in MCOB 1.2.3 R(2) can only apply where the loan being used for a business purpose is secured against a property at least 40 per cent of which is used as a dwelling. It cannot apply to a loan secured on property that is used solely for a business purpose.
(2) Whether a regulated mortgage contract is for a business purpose will be a matter of fact to be determined by a firm depending on the individual circumstances of each case. In the FSA's opinion, a regulated mortgage contract secured, for example, on the borrower's own home, but used to finance the purchase of a single buy-to-let property will not be for a business purpose.

31/10/2004

MCOB 1.2.6

In determining whether a customer is a large business customer for the purposes of MCOB 1.2.3 R(1), a firm will need to have regard to the figure given for the customer's annual turnover in the customer's annual report and accounts or business plan. In addition, a firm may rely on information provided by the customer about the annual turnover, unless, taking a common-sense view of this information, it has reason to doubt it.

31/10/2004

Business loans: additional requirements if tailored route is used

MCOB 1.2.7

In relation to a regulated mortgage contract for a business purpose, if a firm has opted for the tailored route, it must adopt the following modifications to the sourcebook:

(1) (except in relation to sections 6 and 8 of any initial disclosure document or sections 5 and 8 of any combined initial disclosure document) substitute an alternative description of the facility provided under the regulated mortgage contract for 'mortgage' where that term is used in any disclosure;
(2) substitute the term 'illustration' for 'key facts illustration' when opting to use the tailored business loans rules in MCOB 4.9, MCOB 5.7, MCOB 6.7 or MCOB 7.7; and
(3) limit disclosure to facilities provided under the regulated mortgage contract.

06/04/2007
Past version of MCOB 1.2.7 before 06/04/2007

MCOB 1.2.8

(1) Firms are reminded of the requirement in MCOB 2.2.6 R that any communication should be clear, fair and not misleading when substituting an alternative for the term 'mortgage' in accordance with MCOB 1.2.7 R(1).
(2) Possible alternatives to the term 'mortgage' include, for example, 'secured business overdraft', 'secured loan' or 'secured business credit'.

31/10/2004

MCOB 1.2.9

The disclosure rules in MCOB place particular emphasis on the description of borrowing. Where the regulated mortgage contract is for a business purpose, a firm should reflect this emphasis in any disclosure by first describing any borrowing before addressing the other facilities provided under the regulated mortgage contract.

31/10/2004

Home purchase plans

MCOB 1.2.9A

For detail of the tailored provisions applying to home purchase plans, see the section on 'home purchase plans' set out in each relevant chapter.

06/04/2007

Authorised professional firms

MCOB 1.2.10

MCOB does not apply to an authorised professional firm with respect to its non-mainstream regulated activities except for:

(1) MCOB 2.2 (Communications);
(2) MCOB 3 (Financial promotion); and
(3) initial disclosure requirements but only as regards providing the information contained in section 7 (What to do if you have a complaint) and section 8 (Are we covered by the Financial Services Compensation Scheme?) of an initial disclosure document or combined initial disclosure document (see MCOB 4.4 and MCOB 4.10).

06/04/2007
Past version of MCOB 1.2.10 before 06/04/2007

MCOB 1.2.11

Authorised professional firms should be aware of the following:

(1) PROF 5 (Non-mainstream regulated activities); and
(2) MCOB 3.1.9 R (Authorised professional firms) and the exception in article 55 of the Financial Promotion Order (Communications by members of the professions) which applies in relation to financial promotion of qualifying credit or of a home reversion plan of authorised professional firms under MCOB 3.2.5 R(3) (Exemptions).

06/04/2007
Past version of MCOB 1.2.11 before 06/04/2007

Pre-contractual arrangements by a home finance provider

MCOB 1.2.12

In MCOB the activities of a home finance provider which would be arranging but for article 28A of the Regulated Activities Order (Arranging contracts or plans to which the arranger is a party), are to be treated as arranging and therefore also as home finance activities.

06/04/2007
Past version of MCOB 1.2.12 before 06/04/2007

MCOB 1.2.13

The effect of article 28A of the Regulated Activities Order would normally mean that arrangements made by a party to a home finance transaction would not fall within the home finance activity of arranging. So in a direct sale, a home finance provider would not be carrying on the regulated activity of arranging but, where the transaction proceeds to completion, would instead be involved in a regulated activity comprising entering into a home finance transaction. However, the provisions in MCOB on arranging home finance transactions are applied to pre-contractual arrangements by a home finance provider.

06/04/2007
Past version of MCOB 1.2.13 before 06/04/2007

MCOB 1.3

General application: where?

01/12/2004

Location of the customer

MCOB 1.3.1

Except as set out in this section, MCOB applies if the customer of a firm carrying on home finance activities is resident in:

(1) the United Kingdom; or
(2) another EEA State, but in this case only if the activity is carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom;

at the time that the home finance activity is carried on.

06/04/2007
Past version of MCOB 1.3.1 before 06/04/2007

Financial Promotion

MCOB 1.3.2

The territorial scope of MCOB 3 (Financial promotion) is set out in MCOB 3.3 (Application: where?) rather than in this section.

31/10/2004

Electronic commerce activities and communications

MCOB 1.3.3

This sourcebook does not apply to an incoming ECA provider acting as such.

01/11/2007
Past version of MCOB 1.3.3 before 01/11/2007

Distance contracts entered into from an establishment in another EEA State

MCOB 1.3.4

(1) The rules in (2) do not apply to a firm with respect to a regulated mortgage activity or a home purchase activity exclusively concerning a distance contract if the following conditions are satisfied:

(a) the firm carries on the activity from an establishment maintained by the firm in an EEA State other than the United Kingdom; and
(b) either the EEA State:

(i) has implemented the Distance Marketing Directive; or
(ii) has obligations in its domestic law corresponding to those provided for by the Distance Marketing Directive;

and, in either case, with the result that the obligations provided for by the Distance Marketing Directive (or corresponding obligations) are applied by that State when the firm carries on that activity; and

(2) The rules which do not apply are:

(a) initial disclosure requirements in MCOB 4.4 (in respect of regulated mortgage contracts) and MCOB 4.10 (in respect of home purchase plans);
(b) MCOB 4.5 (Additional disclosure for distance mortgage mediation contracts and distance home purchase mediation contracts with consumers);
(c) MCOB 4.6 (Cancellation of distance mortgage mediation contracts) and distance home purchase mediation contracts);
(d) MCOB 5 (Pre-application disclosure);
(e) MCOB 6 (Disclosure at offer stage);
(f) MCOB 7.6.7 R to MCOB 7.6.17 R (Further advances);
(g) MCOB 8.3 (Application of rules in MCOB 4) to the extent that it applies MCOB 4.4 to MCOB 4.6;
(h) [deleted]
(i) MCOB 9.3 (Pre-application disclosure);
(j) MCOB 9.4 (Content of illustrations); and
(k) MCOB 9.5 (Disclosure at offer stage for equity release transactions).

01/12/2009
Past version of MCOB 1.3.4 before 01/12/2009

Distance contracts with retail customers

MCOB 1.3.5

Parts of MCOB relate to distance contracts (or distance mortgage mediation contracts and distance home purchase mediation contracts) with consumers. These expressions are derived from the Distance Marketing Directive, and the following paragraphs provide some guidance to firms on their meaning:

(1) consumer
The Distance Marketing Directive applies for distance contracts with 'any natural person who is acting for purposes which are outside his trade, business or profession', for which the term 'consumer' has been adopted. Examples of individuals who would be regarded as consumers include:

(a) personal representatives, including executors, unless they are acting in a professional capacity, for example a solicitor acting as executor; or
(b) private individuals acting in personal or other family circumstances, for example, a trustee of a family trust.

(2) Distance contract
To be a distance contract, a contract must be concluded under an 'organised distance sales or service-provision scheme' run by the contractual provider of the service who, for the purpose of the contract, makes exclusive use (directly or through an intermediary) of one or more means of distance communication up to and including the time at which the contract is concluded. So:

(a) the firm must have put in place facilities designed to enable a customer to deal with it exclusively at a distance, such as facilities for a customer to deal with it purely by post, telephone, fax or the Internet. If a firm normally operates face-to-face and has no facilities in place enabling a customer to deal with it customarily by distance means, the Distance Marketing Directive will not apply. A one-off transaction effected exclusively by distance means to meet a particular contingency or emergency will not be a distance contract; and
(b) there must have been no simultaneous physical presence of the firm and the other party to the contract throughout the offer, negotiation and conclusion of the contract. So, for example, contracts offered, negotiated and concluded over the Internet, through a telemarketing operation, or by post will normally be distance contracts.

01/11/2007
Past version of MCOB 1.3.5 before 01/11/2007

Use of intermediaries

MCOB 1.3.6

The mere fact that an intermediary (acting for the supplier or for the consumer) is involved, does not make the sale of a financial product or service a distance contract. There will not be a distance contract if there has been simultaneous physical presence of the intermediary and the consumer at some stage in the offer, negotiation and conclusion of the contract.

01/11/2007
Past version of MCOB 1.3.6 before 01/11/2007

MCOB 1.5

Application to appointed representatives

01/12/2004

MCOB 1.5.1

(1) Although MCOB does not apply directly to a firm's appointed representatives, a firm will always be responsible for the acts and omissions of its appointed representatives in carrying on business for which the firm has accepted responsibility (section 39(3) of the Act). In determining whether a firm has complied with any provision of MCOB, anything done or omitted by a firm's appointed representative (when acting as such) will be treated as having been done or omitted by the firm (section 39(4) of the Act).
(2) Firms should refer to SUP 12 (Appointed representatives), which sets out requirements which apply to firms using appointed representatives.

31/10/2004

MCOB 1.6

Application to mortgages in relation to the Consumer Credit Act 1974

06/04/2007
Past version of MCOB 1.6 before 06/04/2007

MCOB 1.6.1

MCOB applies to regulated mortgage contracts entered into on or after 31 October 2004. Variations made on or after that date to contracts entered into before that date are not subject to FSA regulation but may be subject to the Consumer Credit Act 1974. PERG 4.4.13G contains guidance on the variation of contracts entered into before 31 October 2004.

01/07/2005
Past version of MCOB 1.6.1 before 01/07/2005

MCOB 1.6.2

Principle 2 requires a firm to conduct its business with due skill, care and diligence. The purpose of MCOB 1.6.3 R is to reinforce this. The FSA would expect firms to take appropriate steps to determine whether any mortgage it proposes to enter into is subject to FSA regulation.

31/10/2004

MCOB 1.6.3

Before a firm enters into a mortgage, it must take all reasonable steps to establish whether that mortgage will be a regulated mortgage contract and therefore subject to MCOB.

31/10/2004

MCOB 1.6.4

If, notwithstanding the steps taken by a firm to comply with MCOB 1.6.3 R, it transpires that a mortgage which the firm has treated as unregulated is in fact a regulated mortgage contract, the firm must as soon as practicable after the correct status of the mortgage has been established:

(1) contact the customer and provide him with the following information in a durable medium:

(a) a statement that the mortgage contract is a regulated mortgage contract subject to FSA regulation, stating in particular the position with regard to redress and compensation; and
(b) (where relevant) a statement that the Consumer Credit Act 1974 will not apply to the mortgage contract and that any Consumer Credit Act rights or requirements set out in previous communications will not apply;

(2) apply to the regulated mortgage contract all relevant MCOB requirements, such as those on disclosure (in MCOB 7) or on the treatment of customers in arrears (in MCOB 13).

31/10/2004

MCOB 1.6.5

(1) MCOB 1.6.4 R(2) means, for example, that if a firm discovered immediately after completion that a loan was a regulated mortgage contract, the firm would be required to comply with MCOB 7.4 (Disclosure at the start of the contract).
(2) Although MCOB 1.6.4 R recognises that firms may become aware that a mortgage is a regulated mortgage contract at a late stage, the FSA expects this to be an extremely rare occurrence. It could arise, for example, if a firm has acted on the understanding, verified as far as was practicable, that in respect of a particular mortgage contract less than 40% of the land would be used in connection with a dwelling. If it was discovered later that more than 40% of the land was used in connection with the dwelling (and provided that all the other legal requirements were met) the mortgage will be a regulated mortgage contract to which MCOB applies.
(3) MCOB 1.6.3 R and MCOB 1.6.4 R do not override the application of MCOB to any regulated mortgage contract. MCOB applies notwithstanding a firm's genuine belief that a mortgage is unregulated. In deciding whether to take disciplinary action as a result of a breach of MCOB, the FSA will take into account whether the action by the firm was reckless or deliberate (see DEPP 6.2.1G (1)(a)).

28/08/2007
Past version of MCOB 1.6.5 before 28/08/2007

Export chapter as

Legal Instruments that change this Chapter Application and purpose

MCOB 2

Conduct of business standards: general

MCOB 2.1

Application

01/12/2004

Who?

MCOB 2.1.1

This chapter applies to a firm in a category listed in column (1) of the table in MCOB 2.1.2 R in accordance with column (2) of that table.

31/10/2004

MCOB 2.1.2

This table belongs to MCOB 2.1.1 R

(1) Category of firm

(2) Applicable section

mortgage lender
mortgage administrator
mortgage adviser
mortgage arranger

whole chapter except MCOB 2.2.6A R, MCOB 2.2.8A R, MCOB 2.2.8B G. MCOB 2.6A and MCOB 2.8.6 G

home purchase provider

MCOB 2.1, MCOB 2.2.1 G, MCOB 2.2.6 R to MCOB 2.2.9 G, MCOB 2.5, MCOB 2.6, MCOB 2.6A.1 R to MCOB 2.6A.4 G, MCOB 2.6A.7 G to MCOB 2.6A.10 G, MCOB 2.7.4 R to MCOB 2.7.6 R, MCOB 2.7A and MCOB 2.8.6 G

home purchase administrator

As for a home purchase provider but MCOB 2.6A.1 R to MCOB 2.6A.4 G and MCOB 2.6A.7 G do not apply

home purchase adviser
home purchase arranger

As for a home purchase provider but MCOB 2.6A does not apply

reversion provider

whole chapter except MCOB 2.2.6A R, MCOB 2.2.8A R and MCOB 2.2.8B G, MCOB 2.6A.7 G, MCOB 2.7.4 R to MCOB 2.7.6 R and MCOB 2.8.6 G

reversion administrator
reversion arranger

As for a reversion provider but the relevant provisions of MCOB 2.6A apply only when arranging for a home reversion plan to be entered into by a reversion occupier with, or administering a home reversion plan provided by, an unauthorised reversion provider.

reversion adviser

As for a reversion provider but MCOB 2.6A does not apply

SRB administrator

MCOB 2.1, MCOB 2.2.1 G, MCOB 2.2.2 G, MCOB 2.2.3 R, MCOB 2.2.6 R, MCOB 2.2.7 G, MCOB 2.2.8 G, MCOB 2.5, MCOB 2.6, MCOB 2.6A.5BR (5), MCOB 2.6A.8 R to MCOB 2.6A.11 G, MCOB 2.6A.17A R, MCOB 2.6A.18 G, MCOB 2.7.1 G to MCOB 2.7.5 R, MCOB 2.7A, MCOB 2.8.1 G to MCOB 2.8.5 G.

SRB adviser

Whole chapter except MCOB 2.2.5 G, MCOB 2.2.6A R, MCOB 2.2.8A R, MCOB 2.2.8B G, MCOB 2.6A.5 R, MCOB 2.6A.7 G, MCOB 2.6A.17 R and MCOB 2.8.6 G.

SRB agreement provider

Whole chapter except MCOB 2.2.5 G, MCOB 2.2.6A R, MCOB 2.2.8A R, MCOB 2.2.8B G, MCOB 2.6A.5 R, MCOB 2.6A.7 G, MCOB 2.6A.17 R, MCOB 2.6A.17A R, MCOB 2.6A.18 G and MCOB 2.8.6 G.

SRB arranger

Whole chapter except MCOB 2.2.5 G, MCOB 2.2.6A R, MCOB 2.2.8A R, MCOB 2.2.8B G, MCOB 2.6A.5 R, MCOB 2.6A.7 G, MCOB 2.6A.17 R and MCOB 2.8.6 G.

a firm that communicates or approves a financial promotion of qualifying credit or of a home reversion plan

MCOB 2.5, MCOB 2.6, MCOB 2.7 (except, when the financial promotion relates to a home reversion plan, MCOB 2.7.4 R to MCOB 2.7.6 R), MCOB 2.7A and MCOB 2.8 (except MCOB 2.8.6 G)

a firm that communicates or approves a financial promotion of a home purchase plan

MCOB 2.2.6 R to MCOB 2.2.9 G, MCOB 2.5, MCOB 2.6, MCOB 2.7, MCOB 2.7A and MCOB 2.8.6 G

30/06/2010
Past version of MCOB 2.1.2 before 30/06/2010

What?

MCOB 2.1.3

This chapter applies in relation to:

(1) home finance activities;
(1A) to the extent specified in MCOB 2.1.2 R, regulated sale and rent back activity;
(2) those activities in MCOB 12 and MCOB 13 that are carried on after a regulated mortgage contract or home purchase plan has come to an end following the sale of a repossessed property, and those activities in MCOB 12 that are carried on after a home reversion plan has ended for any reason; and
(3) the communication or approval of a financial promotion of qualifying credit, of a home purchase plan, of a home reversion plan or of a regulated sale and rent back agreement.

30/06/2010
Past version of MCOB 2.1.3 before 30/06/2010

MCOB 2.2

Communications

01/12/2004

Purpose

MCOB 2.2.1

The purpose of MCOB 2.2 is to restate, in slightly amended form, and as a separate rule, the part of Principle 7 (Communications with clients) that relates to communication of information. This enables a customer, who is a private person, to bring an action for damages under section 150 (Contravention of rules) of the Act to recover loss resulting from a firm that carries on the activities referred to in MCOB 2.1.3 R communicating information, in the course of those activities, in a way that is not clear or fair, or that is misleading. MCOB 2.2 also clarifies the expectations of the FSA where any rule requires the provision of information and there are two or more customers.

31/10/2004

General

MCOB 2.2.2

In many circumstances there will be two or more customers under any home finance transaction, or two or more prospective customers looking to enter into the same home finance transaction. In such circumstances, where a rule in MCOB requires the provision of information to such customers and the customers have different addresses, a firm sending out this information should send it to each address. If the customers share the same address it will be sufficient to send a single copy of the information addressed to each of the customers.

06/04/2007
Past version of MCOB 2.2.2 before 06/04/2007

Prescribed terms for regulated mortgage contracts, home reversion plans and regulated sale and rent back agreements

MCOB 2.2.3

In any communication to a customer, a firm must:

(1) describe any early repayment charge as an 'early repayment charge';
(2) describe any higher lending charge as a 'higher lending charge';
(3) describe any lifetime mortgage as a 'lifetime mortgage';
(4) describe any home reversion plan as a 'home reversion plan'; and
(5) describe any regulated sale and rent back agreement as a 'sale and rent back agreement';

and not use any other expression to describe them.

30/06/2010
Past version of MCOB 2.2.3 before 30/06/2010

Related investment advice

MCOB 2.2.5

Firms are reminded that they should follow the relevant rules in COBS 6 and COBS 13 relating to advice and disclosure on investments if they are advising the customer on an investment such as an annuity associated with an equity release transaction or an ISA used as a repayment vehicle.

01/11/2007
Past version of MCOB 2.2.5 before 01/11/2007

Clear, fair and not misleading communications and financial promotions

MCOB 2.2.6

(1) When a firm communicates information to a customer, it must take reasonable steps to communicate in a way that is clear, fair and not misleading.
(2) [deleted]

06/04/2007
Past version of MCOB 2.2.6 before 06/04/2007

MCOB 2.2.6A

A firm which approves a financial promotion of a home purchase plan must take reasonable steps to ensure that the financial promotion is clear, fair and not misleading.

30/06/2010
Past version of MCOB 2.2.6A before 30/06/2010

MCOB 2.2.7

When considering how to comply with the requirements of, these rules on clear, fair and not misleading communications and financial promotions, a firm should have regard to the customer's knowledge of the home finance transaction to which the information relates.

06/04/2007
Past version of MCOB 2.2.7 before 06/04/2007

MCOB 2.2.8

The rule on clear, fair and not misleading communications covers all communications with customers, for example any oral or written statements, telephone calls and any correspondence which is not a financial promotion to which MCOB 3 (Financial promotion) applies. In respect of financial promotions of qualifying credit, of home reversion plans or of regulated sale and rent back agreements, firms should note the separate requirements of MCOB 3.

30/06/2010
Past version of MCOB 2.2.8 before 30/06/2010

MCOB 2.2.8A

If a firm uses a figure equivalent to an APR in a communication of a financial promotion of a home purchase plan, when calculating that figure it must use an approach equivalent to the APR rules.

06/04/2007

MCOB 2.2.8B

The following guidance may be relevant to a firm that communicates or approves a financial promotion of a home purchase plan:

(1) guidance on what 'communicate', 'approve' and 'financial promotion' mean, and on the media of communication to which financial promotion rules apply (see MCOB 3.2.1 G and MCOB 3.2.2 G);
(2) guidance on other Handbook provisions relevant to financial promotions (see MCOB 3.2.8 G to MCOB 3.2.9 G);
(3) guidance on other regulations and guidelines relevant to financial promotions (see MCOB 3.5.3 G);
(4) guidance on referring to the FSA (see MCOB 3.6.2 G (3));
(5) guidance on the clear, fair and not misleading standard (see MCOB 3.6.5 G, MCOB 3.6.10 G and MCOB 3.6.14 G); and
(6) guidance on the use of the Internet for communicating financial promotions (see MCOB 3.12 and PERG 8.22).

06/10/2010
Past version of MCOB 2.2.8B before 06/10/2010

MCOB 2.2.9

Prominence of relevant information can play a key role in ensuring that a communication is clear, fair and not misleading. Where this is the case, the firm should consider prominence in the context of the communication as a whole. Use can be made of the positioning of text, background and text colour and type size to ensure that specified information meets the requirements of MCOB.

31/10/2004

MCOB 2.3

Inducements: regulated mortgage contracts, home reversion plans and regulated sale and rent back agreements

30/06/2010
Past version of MCOB 2.3 before 30/06/2010

Purpose

MCOB 2.3.1

The purpose of MCOB 2.3 is to ensure, in accordance with Principles 1, 6 and 8, that a firm does not conduct business under arrangements that might give rise to a conflict with its duty to customers or to unfair treatment of them.

06/04/2007
Past version of MCOB 2.3.1 before 06/04/2007

Prohibition of inducements

MCOB 2.3.2

A firm must take reasonable steps to ensure that it, and any person acting on its behalf, does not:

(1) offer, give, solicit or accept an inducement; or
(2) direct or refer any actual or potential business in relation to a regulated mortgage contract, home reversion plan or regulated sale and rent back agreement to another person on its own initiative or on the instructions of an associate;

if it is likely to conflict to a material extent with any duty that the firm owes to its customers in connection with such a home finance transaction or any duty which such a recipient firm owes to its customers in connection with such a home finance transaction.

30/06/2010
Past version of MCOB 2.3.2 before 30/06/2010

MCOB 2.3.3

An inducement is a benefit offered with a view to bringing about a particular course of action.

31/10/2004

MCOB 2.3.4

The purpose of MCOB 2.3.2 R(2) is to prevent the requirement in MCOB 2.3.2 R(1) being circumvented by an inducement being given or received by an unregulated associate. There may be circumstances, however, where a firm is able to demonstrate that it could not reasonably have knowledge of an associate giving or receiving an inducement. It should not, however, direct business to another person on the instruction of an associate if this is likely to conflict with the interests of its customers.

31/10/2004

MCOB 2.3.5

MCOB 2.3.2 R does not prevent a firm:

(1) assisting a home finance intermediary so that the quality of the home finance intermediary's service to customers is enhanced; or
(2) giving or receiving indirect benefits (such as gifts, hospitality and promotional competition prizes);

providing in either case this is not likely to give rise to a conflict with the duties that the recipient owes to the customer. In particular, such benefits should not be of a kind or value that is likely to impair the ability of a firm to act in compliance with any rule in MCOB, for example the suitability requirements in MCOB 4.7 (Advised sales).

06/04/2007
Past version of MCOB 2.3.5 before 06/04/2007

MCOB 2.3.6

(1) A firm must not operate a system of giving or offering inducements to a mortgage intermediary, reversion intermediary, SRB intermediary or any other third party whereby the value of the inducement increases if the intermediary or third party, such as a packager, exceeds a target set for the amount of business referred (for example, a volume override).
(2) A firm must not solicit or accept an inducement whereby the value of the inducement increases if the firm exceeds a target set for the amount of business referred.

30/06/2010
Past version of MCOB 2.3.6 before 30/06/2010

Quantification of inducements

MCOB 2.3.7

(1) A mortgage lender, reversion provider or SRB agreement provider must quantify, in cash terms, any material inducement it offers to a mortgage intermediary, reversion intermediary, SRB intermediary or a third party.
(2) In quantifying the value of the material inducement, the firm must include any subsequent payments (such as a trail fee) made where the customer continues with the same home finance transaction.

30/06/2010
Past version of MCOB 2.3.7 before 30/06/2010

MCOB 2.3.8

(1) Quantification of any material inducement offered by the mortgage lender or reversion provider supports the disclosure requirements elsewhere in MCOB. Further guidance on the disclosure of any inducement in cash terms is provided in MCOB 5.6.118 G for regulated mortgage contracts other than lifetime mortgages, MCOB 9.4.124 G for lifetime mortgages and MCOB 9.4.173 G for home reversion plans.
(1A) Quantification of any material inducement offered by a SRB agreement provider in connection with the conclusion of a regulated sale and rent back agreement must be included in the disclosures made to the potential SRB agreement seller under MCOB 5.9.1R (1A)(c).
(2) A payment made to a third party unconnected with the home finance intermediary, where that payment only reflects the cost of outsourcing work relating to the processing of mortgage applications, would not be considered an inducement for these purposes.

30/06/2010
Past version of MCOB 2.3.8 before 30/06/2010

MCOB 2.4

High pressure sales: regulated mortgage contracts, home reversion plans and regulated sale and rent back agreements

01/07/2009
Past version of MCOB 2.4 before 01/07/2009

Purpose

MCOB 2.4.1

The purpose of this section is to remind firms of the relevance of the high level standards in PRIN, especially with regard to the use of sales methods that may lead a customer to feel pressurised to enter into, or vary, a regulated mortgage contract, home reversion plan or regulated sale and rent back agreement.

01/07/2009
Past version of MCOB 2.4.1 before 01/07/2009

Fair treatment

MCOB 2.4.2

(1) Principle 6 (Customers' interests) requires that a firm must pay due regard to the interests of its customers and treat them fairly. This means, for example, that a firm should avoid selling practices that commit customers (or lead customers to believe that they are committed) to any regulated mortgage contract or home reversion plan before they have been able to consider the illustration and offer document. One such practice might be to present a new customer with an illustration, offer document and mortgage deed at one time and to require the mortgage deed to be signed on the same occasion (when there is no urgent need to do so).
(2) For regulated sale and rent back agreements, the firm should avoid practices that commit customers (or lead customers to believe they are committed) to any such agreement before they have been able to consider the information that is required by MCOB 5.9.1 R (Pre-sale disclosure) and before the expiry of the 14 day cooling-off period as required by MCOB 6.9.4 R (Written pre-offer document: Stage One).

30/06/2010
Past version of MCOB 2.4.2 before 30/06/2010

Information

MCOB 2.4.3

Principle 7 (Communications with clients) requires that a firm must 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. This means, for example, that a firm should avoid giving any customer a false impression about the availability of a regulated mortgage contract, home reversion plan or regulated sale and rent back agreement, such as describing it as a 'special offer' not available after a certain date unless this is really the case.

01/07/2009
Past version of MCOB 2.4.3 before 01/07/2009

MCOB 2.5

Reliance on others

01/12/2004

Purpose

MCOB 2.5.1

Principle 2 requires a firm to conduct its business with due skill, care and diligence. MCOB 2.5 indicates the extent to which firms that carry on home finance activities and that communicate or approve a financial promotion can meet this requirement by relying on others.

06/04/2007
Past version of MCOB 2.5.1 before 06/04/2007

When firms can rely on others

MCOB 2.5.2

A firm will be taken to be in compliance with any rule in MCOB that requires a firm to obtain information to the extent that the firm can show that it was reasonable for it to rely on information provided to it by another person.

31/10/2004

MCOB 2.5.3

(1) In relying on MCOB 2.5.2 R, a firm should take reasonable steps to establish that the other person providing the information is:

(a) not connected with the firm; and
(b) competent to provide the information.

(2) Compliance with (1) may be relied on as tending to establish compliance with MCOB 2.5.2 R.
(3) Contravention of (1) may be relied on as tending to establish contravention of MCOB 2.5.2 R.

31/10/2004

MCOB 2.5.4

(1) Any information which a rule in MCOB requires to be sent to a customer may be sent to another person on the instruction of the customer, so long as the recipient is not connected with the firm.
(2) There is no need for a firm to send information to a customer where it has taken reasonable steps to establish that this has been or will be supplied by another person.

31/10/2004

MCOB 2.6

Exclusion of liability

01/12/2004

Purpose

MCOB 2.6.1

Principle 6 (Customers' interests) requires a firm to pay due regard to the interests of its customers and treat them fairly. A firm may not exclude the duties it owes or the liabilities it has to a customer under the regulatory system. It may exclude other duties and liabilities only if it is reasonable for it to do so.

31/10/2004

Limits on the exclusion of liability

MCOB 2.6.2

A firm must not, in any written or oral communication, seek to exclude or restrict, or to rely on any exclusion or restriction of, any duty or liability it may have to a customer under the regulatory system.

31/10/2004

MCOB 2.6.3

A firm must not, in any written or oral communication to a customer, seek to exclude or restrict, or to rely on any exclusion or restriction of, any duty or liability not referred to in MCOB 2.6.2 R unless it is reasonable for it to do so.

31/10/2004

MCOB 2.6A

Protecting customer's interests: home purchase plans, home reversion plans and regulated sale and rent back agreements

01/07/2009
Past version of MCOB 2.6A before 01/07/2009

MCOB 2.6A.1

A firm must ensure that the interests of its customer under a home purchase plan, home reversion plan or regulated sale and rent back agreement are protected to a reasonable standard.

01/07/2009
Past version of MCOB 2.6A.1 before 01/07/2009

MCOB 2.6A.2

Circumstances that a firm should consider include how the customer will be protected in the event of:

(1) the failure of a reversion provider, home purchase provider or SRB agreement provider;
(2) the transfer of a reversion provider's, home purchase provider's or SRB agreement provider's interest (or the interest the provider would have had, had it not nominated a third party to hold it) in the property to a third party;
(3) other dealings by a reversion provider, home purchase provider or SRB agreement provider (or its nominee) with a third party; and
(4) a reversion provider's, home purchase provider's or SRB agreement provider's (or its nominee's) failure to perform obligations owed to third parties, or imposed by statute.

01/07/2009
Past version of MCOB 2.6A.2 before 01/07/2009

MCOB 2.6A.3

The steps that a firm might take in order to protect its customer's interests will depend on a number of factors, including the nature and structure of the home purchase plan, home reversion plan or regulated sale and rent back agreement and the jurisdiction in which the property is situated. If it is not possible to achieve reasonable protection (for example, due to impediments under a particular legal system) then a firm should not enter into, arrange or administer the plan.

01/07/2009
Past version of MCOB 2.6A.3 before 01/07/2009

MCOB 2.6A.4

(1) In the FSA's view, a customer's interests will include:

(a) protection of the customer's rights under the plan, in particular the right to occupy the property throughout its term;
(b) protection of any interest (legal or beneficial) that the customer retains, acquires or is intended to acquire in the property, including the expectation that such interests will be unencumbered by third party interests;
(c) that, where a customer pays sums under a home purchase plan towards the purchase price of the property, those sums will be applied towards the purchase price. Or, in circumstances where that is not practicable (for example, on repossession), that an appropriate amount will be returned to the customer; and
(d) a customer's contractual entitlement to receive certain sums back after a qualifying period, such as where it has been agreed that a certain percentage of discount will be refunded to the customer after a set period of tenancy.

(2) The protections that a firm should consider include:

(a) the extent to which different forms of tenure protect the tenant's right to occupy the property and afford protection against removal. In particular, granting the customer a licence to occupy the property is unlikely to provide an adequate level of security;
(b) (except in Scotland) the need for any agreement under which a customer has a right to acquire an interest in the property to be specifically enforceable;
(c) the extent to which appropriate registrations, restrictions, notices or other entries should be made in the relevant land register;
(d) the timing of entries in the relevant land register and who should be responsible for making them; and
(e) the customer's need for a full and clear understanding of all the steps that the firm expects him or his advisers to take to protect his interests both at the time the plan is entered into, and throughout its duration.

30/06/2010
Past version of MCOB 2.6A.4 before 30/06/2010

Protecting customers' interests: additional material for home reversion plans

MCOB 2.6A.5

Unless it is satisfied on reasonable grounds based on the customer's knowledge, expertise and experience that it is unnecessary, a firm must obtain from its customer's legal adviser, before its customer enters into a home reversion plan, confirmation that:

(1) he has been instructed to ensure that the customer's legal rights under the plan are protected to a reasonable standard; and
(2) he has explained to the customer those aspects of the customer's legal rights and obligations under the home reversion plan that he needs to understand.

06/04/2007

Protecting customer's interests: regulated sale and rent back agreements

MCOB 2.6A.5A

A firm must ensure that before a SRB agreement seller enters into a regulated sale and rent back agreement, the SRB agreement seller is made aware of the availability and importance of independent legal or professional advice.

01/07/2009

Protecting customers' interests under regulated sale and rent back agreements: security of tenure

MCOB 2.6A.5B

(1) When entering into a regulated sale and rent back agreement, a firm must ensure that, under the terms of the regulated sale and rent back agreement:

(a) the entitlement of the SRB agreement seller (or trust beneficiary or related person) to occupy the property is governed by a tenancy, which is structured:

(i) if the property is in England and Wales, as an assured tenancy (including an assured shorthold tenancy) under the Housing Act 1988 (as amended);
(ii) if the property is in Scotland, as an assured tenancy (including a short assured tenancy) under the Housing (Scotland) Act 1988, (as amended); and
(iii) if the property is in Northern Ireland, as a private tenancy under the Private Tenancies (Northern Ireland) Order 2006;

(b) the tenancy is for a fixed term of no less than five years;
(c) the terms of the tenancy provide for the tenant to terminate the tenancy during the fixed term on no more than three months' notice (and with no other conditions attached); and
(d) each of the terms of the tenancy is fair.

(2) When entering into a regulated sale and rent back agreement, a firm must ensure that, under the terms of the regulated sale and rent back agreement, if the property is in England and Wales, the terms of the tenancy do not:

(a) give the landlord power to determine the tenancy in certain circumstances as referred to in section 5(1) of the Housing Act 1988, as amended; or
(b) otherwise make provision for the tenancy to be brought to an end by the landlord save on a ground or grounds for possession applicable for an assured tenancy under the Housing Act 1988, as amended; or
(c) make provision for the tenancy to be brought to an end on any of Grounds 2, 6, 8 or 9 under the Housing Act 1988, as amended.

A firm may not rely during the fixed term of the tenancy on any ground for possession of the property other than a ground for possession on which the terms of the tenancy may under this paragraph (2) make provision for the tenancy to be brought to an end by the landlord, and a firm may only rely on any ground for possession if it is fair for the firm to do so.
(3) When entering into a regulated sale and rent back agreement, a firm must ensure that, under the terms of the regulated sale and rent back agreement, if the property is in Scotland, the terms of the tenancy do not include:

(a) any provision for it to be brought to an end by the landlord during the fixed term other than a ground for possession applicable for an assured tenancy under the Housing (Scotland) Act 1988, as amended; or
(b) Grounds 2, 6, 8 or 9 under the Housing (Scotland) Act 1988, (as amended).

A firm may not rely during the fixed term of the tenancy on any ground for possession of the property other than the grounds permitted under this paragraph (3) to be included in the terms of the tenancy, and a firm may only rely on any ground for possession if it is fair for the firm to do so.
(4) When entering into a regulated sale and rent back agreement, a firm must ensure that, under the terms of the regulated sale and rent back agreement, if the property is in Northern Ireland, the terms of the tenancy do not include:

(a) any provision which would permit the landlord to forfeit the lease and obtain possession of the property during the fixed term unless the provision is equivalent to a ground for possession applicable for an assured tenancy under Schedule 2 to the Housing Act 1988, as amended, in England; or
(b) any provision which would permit the landlord to forfeit the lease and obtain possession of the property on the basis that:

(i) a mortgagee (or chargee) under a mortgage (or charge) entered into by the landlord requires vacant possession for the purposes of exercising a power of sale of the property; or
(ii) the landlord intends to demolish or reconstruct, or carry out substantial works on, the property or any part of the property; or
(iii) there are arrears of rent, unless the conditions applicable to either Ground 9 or Ground 10 under the Housing Act 1988, as amended, in England, are satisfied; or
(iv) alternative accommodation is available for the tenant.

A firm may not rely during the fixed term of the tenancy on any circumstance to forfeit the lease and obtain possession of the property other than the circumstances permitted under this paragraph (4) to be included in the tenancy agreement, and a firm may only rely on any circumstance if it is fair for the firm to do so.
(5) A firm must not take, or propose or threaten to take, any steps to evict the SRB agreement seller (or trust beneficiary or related person) other than by applying to the court for a possession order based on the grounds or circumstances, reliance on which is not prohibited by this rule, and enforcing that order in a lawful manner.
(6) Where a SRB agreement provider enters into or proposes to enter into (whether before or after the commencement of the tenancy) a mortgage (or charge or standard security) over the interest it obtains under a regulated sale and rent back agreement, the firm must ensure that the mortgagee (or chargee or security holder) has agreed in writing to the proposed letting under the agreement, and to the terms of the agreement. The firm must provide to the SRB agreement seller a copy of the agreement in writing of the mortgagee (or chargee or security holder).

[Note: In England, Wales and Scotland a landlord, such as a SRB agreement provider, can only seek possession of a property during the fixed term of an assured tenancy if one or more of a limited number of grounds for possession set out in (in England and Wales) the Housing Act 1988, as amended, or (in Scotland) the Housing (Scotland) Act 1988, as amended, applies and the terms of the tenancy make provision for it to be ended on any of these grounds. Once the fixed term of the assured tenancy has ended, the landlord has the right to seek possession on broader grounds. Where the tenancy is (in England) an assured shorthold tenancy or (in Scotland) a short assured tenancy, the landlord has an additional right to seek possession from the end of the fixed term.

In Northern Ireland, the position is governed by the Private Tenancies (Northern Ireland) Order 2006 and the parties are free to agree the terms of a tenancy including its duration and the grounds on which the landlord may seek possession, including during any fixed term.

In any event it is for the court to decide whether one or more of the grounds for possession actually applies in the particular circumstances of any case.

In Northern Ireland, a tenant must give at least four weeks' notice to quit. Northern Ireland law implies a fixed term of six months in a private tenancy unless the parties agree an alternative fixed term, so a notice to quit expiring before the first six months of the tenancy may not be effective.]

30/06/2010

MCOB 2.6A.5C

In the light of MCOB 2.6A.5BR (1)(c), and in accordance with Principle 6, a firm should not seek to prevent a tenant in Northern Ireland from ending the tenancy on less than the agreed notice period (not exceeding three months in accordance with MCOB 2.6A.5BR (1)(c)), where the notice is given in the first six months of the tenancy.

30/06/2010

MCOB 2.6A.6

Firms remain responsible for ensuring that their customers' interests are protected to a reasonable standard.

06/04/2007

Protecting customers' interests: additional material for home purchase plans

MCOB 2.6A.7

A home purchase provider should consider obtaining confirmation from the customer's legal adviser that he has carried out, or will carry out, the steps that the firm expects the customer or his legal advisers to take to protect his interests at the time the plan is taken out.

06/04/2007

Treating customers fairly: home purchase plans, home reversion plans and regulated sale and rent back agreements

MCOB 2.6A.8

A firm must pay due regard to the interests of its customer and treat him fairly when drafting, amending the terms of, or imposing obligations or exercising rights or discretions under, a home purchase plan, home reversion plan or regulated sale and rent back agreement.

01/07/2009
Past version of MCOB 2.6A.8 before 01/07/2009

MCOB 2.6A.9

A firm is unlikely, for example, to be treating its customer fairly in relation to termination of a home purchase plan, home reversion plan or regulated sale and rent back agreement if:

(1) the grounds on which it may terminate all or part of a plan or agreement are unduly wide, or on which a customer may terminate are unduly narrow; or
(2) the customer is not given appropriate notice of termination.

01/07/2009
Past version of MCOB 2.6A.9 before 01/07/2009

MCOB 2.6A.10

A firm is also unlikely to be treating its customer fairly if, upon termination of an agreement under a home purchase plan, home reversion plan or regulated sale and rent back agreement, the customer does not receive (net of any reasonable sums payable by the customer):

(1) in the case of a home reversion plan or regulated sale and rent back agreement where the customer retains a beneficial interest in the property, the value of that beneficial interest; or
(2) in the case of a home purchase plan, the value of purchase payments made.

[Note: The terms of a home purchase plan, home reversion plan or regulated sale and rent back agreement should take into account relevant legal obligations such as those under the Unfair Terms Regulations and, where applicable, the Housing Act 1988 (or, in Scotland, the Housing (Scotland) Act 1988). A firm may find material on the FSA website concerning the FSA's consumer protection powers useful. The Office of Fair Trading has also published guidance on the impact of the Unfair Terms Regulations on tenancy agreements.]

01/07/2009
Past version of MCOB 2.6A.10 before 01/07/2009

Treating customers fairly: home reversion plans and regulated sale and rent back agreements

MCOB 2.6A.11

A firm is unlikely, for example, to be treating a reversion occupier or SRB agreement seller fairly if:

(1) the reversion occupier or SRB agreement seller is obliged to maintain the property to a standard which exceeds the standard that the property is in when the home reversion plan or regulated sale and rent back agreement commences;
(2) the reversion occupier or SRB agreement seller is not entitled to, or is not given, reasonable notice of an inspection, or the inspection is conducted in a way that is biased against him;
(3) unreasonable restrictions are imposed on who may occupy the property, taking into account the potential needs of the reversion occupier or SRB agreement seller throughout the duration of the home reversion plan or regulated sale and rent back agreement;
(4) unreasonable restrictions are imposed on the uses to which the property may be put;
(5) the reversion occupier or SRB agreement seller is unreasonably treated as having abandoned the property. For example, it is likely to be unreasonable to treat a property as abandoned based only on a period of non-occupation;
(5A) the rent payable under a regulated sale and rent back agreement is increased by an unreasonable amount or any charges payable under a regulated sale and rent back agreement are unreasonably imposed after the agreement is concluded; and
(6) where the reversion occupier has a reasonable expectation that the home reversion plan can be transferred to another property, agreement to such a transfer is, or can be, refused unreasonably.

01/07/2009
Past version of MCOB 2.6A.11 before 01/07/2009

Independent valuation: home reversion plans and regulated sale and rent back agreements

MCOB 2.6A.12

A firm must ensure that any valuation is carried out by a competent valuer who is independent of the reversion provider or SRB agreement provider.

01/07/2009
Past version of MCOB 2.6A.12 before 01/07/2009

MCOB 2.6A.12A

A firm must ensure that any valuation for the purposes of a regulated sale and rent back agreement is carried out by a valuer who owes a duty of care to the customer in valuing the property.

30/06/2010

MCOB 2.6A.13

(1) A valuer may be considered competent if he is a suitably qualified member of a professional body.
(2) A valuer may be considered independent if:

(a) the customer can choose the valuer subject to the firm objecting on reasonable grounds and to the valuer being competent;
(b) he owes a duty of care to the customer in valuing the property; and
(c) the customer has an appropriate remedy against him under a complaints procedure which allows the complaint to be referred to an independent person whose decision is binding on the valuer.

(3) Compliance with (1) and (2) (except, in the case of a regulated sale and rent back agreement, (2)(b)) may be relied on as tending to establish compliance with MCOB 2.6A.12 R.
(4) [deleted]
(5) For a regulated sale and rent back agreement, contravention of (1) or (2) (except (2)(b)) may be relied on as tending to show contravention of MCOB 2.6A.12 R.

30/06/2010
Past version of MCOB 2.6A.13 before 30/06/2010

MCOB 2.6A.13A

A firm may wish to use the form of joint instruction letter set out in MCOB 2 Annex 1G with a view to establishing that a valuer owes a duty of care to the customer (see MCOB 2.6A.12A R). That form incorporates the definition of "market value" required by MCOB 6.9.2R (1)(b).

30/06/2010

MCOB 2.6A.14

Members of the Royal Institution of Chartered Surveyors, for example, are required to operate a complaints procedure that allows the complaint to be referred to an independent person whose decision binds the valuer and which, in the FSA's view, provides a customer with an appropriate remedy.

06/04/2007

Obtaining best price: partial home reversion plans or regulated sale and rent back agreements

MCOB 2.6A.15

A firm must take reasonable steps to ensure that, when a home reversion plan or regulated sale and rent back agreement ends and the customer retains a beneficial interest in the property:

(1) the property is sold within a reasonable period of time; and
(2) the best price that might reasonably be obtained is paid.

01/07/2009
Past version of MCOB 2.6A.15 before 01/07/2009

MCOB 2.6A.16

It is recognised that a balance has to be struck between the need to sell the property as soon as possible, and other factors, such as market conditions, which may prompt the delay of the sale. Legitimate reasons for deferring action might include the expiry of a period when a grant is repayable on re-sale, or the discovery of a title defect that needs to be remedied if the optimal selling price is to be achieved.

06/04/2007

Arranging or administering for unauthorised providers: home reversion plans

MCOB 2.6A.17

For the purpose of this section (except this rule), a reversion arranger or reversion administrator's customer:

(1) includes a reversion occupier or potential reversion occupier who enters, or proposes to enter, into a home reversion plan with an unauthorised reversion provider who is the firm's customer; and
(2) excludes an unauthorised reversion provider.

06/04/2007

Arranging or administering for unauthorised providers: regulated sale and rent back agreements

MCOB 2.6A.17A

For the purpose of this section (except this rule), a SRB arranger's or SRB administrator's customer:

(1) includes a SRB agreement seller or potential SRB agreement seller who enters, or proposes to enter, into a regulated sale and rent back agreement with an unauthorised SRB agreement provider who is the firm's customer; and
(2) excludes an unauthorised SRB agreement provider.

01/07/2009

Arranging or administering for unauthorised providers: home reversion plans and regulated sale and rent back agreements

MCOB 2.6A.18

A person may enter into a home reversion plan or regulated sale and rent back agreement as provider or agreement provider without being regulated by the FSA (or an exempt person) if the person does not do so by way of business (see PERG 14.5). If a firm arranges or makes arrangements for such a person to enter into a home reversion plan or regulated sale and rent back agreement as provider or agreement provider, the firm will be responsible for ensuring that the reversion occupier's or SRB agreement seller's interests are protected to a reasonable standard, even if the reversion arranger or SRB arranger is not acting for the reversion occupier or SRB agreement seller. A reversion administrator or SRB administrator is under the same obligation in relation to a reversion occupier or SRB agreement seller under a home reversion plan or regulated sale and rent back agreement which it administers on behalf of an unauthorised reversion provider or unauthorised SRB agreement provider.

06/10/2009
Past version of MCOB 2.6A.18 before 06/10/2009

MCOB 2.7

Application to electronic media and distance communications

01/12/2004

MCOB 2.7.1

GEN 2.2.14 R (References to writing) has the effect that electronic media may be used to make communications that are required by the Handbook to be 'in writing' unless a contrary intention appears. In MCOB, the use of an electronic medium is restricted in certain circumstances to a durable medium as required by the Distance Marketing Directive.

31/10/2004

Additional guidance in respect of electronic communication with or for customers

MCOB 2.7.2

For any electronic communication with a customer in relation to a home finance transaction a firm should:

(1) have in place appropriate arrangements, including contingency plans, to ensure the secure transmission and receipt of the communication; it should also be able to verify the authenticity and integrity of the communication together with the date and time sent and received; the arrangements should be proportionate and take into account the different levels of risk in a firm's business;
(2) be able to demonstrate that the customer wishes to communicate using this medium; and
(3) if entering into an agreement, make it clear to the customer that a contractual relationship is created that has legal consequences.

06/04/2007
Past version of MCOB 2.7.2 before 06/04/2007

MCOB 2.7.3

A firm should note that GEN 2.2.14 R (References to writing) does not affect any other legal requirement that may apply in relation to the form or manner of executing a document or agreement.

31/10/2004

General provisions related to distance contracts

MCOB 2.7.4

During the course of a distance contract with a consumer, the making or performance of which constitutes or is part of a regulated mortgage contract, home purchase plan or regulated sale and rent back agreement:

(1) the firm must, at the consumer's request, provide a paper copy of the contractual terms and conditions of the regulated mortgage contract, home purchase plan, regulated sale and rent back agreement or services being provided by the firm; and
(2) the firm must comply with the customer's request to change the means of distance communication used, unless this is incompatible with the regulated mortgage contract, home purchase plan, regulated sale and rent back agreement or service being provided by the firm.

30/06/2010
Past version of MCOB 2.7.4 before 30/06/2010

MCOB 2.7.5

A firm must ensure that information provided to a consumer before the conclusion of a distance contract about his contractual obligations under that contract conform with the contractual obligations that would be imposed on him under the law applying if the contract were concluded.

01/11/2007
Past version of MCOB 2.7.5 before 01/11/2007

Unsolicited services

MCOB 2.7.6

(1) A firm must not:

(a) supply a service to a consumer without a prior request on his part, when this activity includes a request for immediate or deferred payment; or
(b) enforce any obligations against a consumer in the event of unsolicited supplies of services, the absence of a reply not constituting consent.

(2) Paragraph (1) applies in relation to mortgage mediation activities, entering into a regulated mortgage contract, home purchase mediation activities or entering into a home purchase plan under an organised distance sales or service-provision scheme run by the firm or by an intermediary, who, for the purpose of that supply, makes exclusive use of one or more means of distance communication up to and including the time at which the services are supplied.

01/11/2007
Past version of MCOB 2.7.6 before 01/11/2007

MCOB 2.7A

E-Commerce

01/11/2007

Application

MCOB 2.7A.1

This section applies to a firm carrying on an electronic commerce activity from an establishment in the United Kingdom, with or for a person in the United Kingdom or another EEA state, in relation to a home finance transaction.

01/11/2007

Information about the firm and its products or services

MCOB 2.7A.2

A firm must make at least the following information easily, directly and permanently accessible to the recipients of the information society services it provides:

(1) its name;
(2) the geographic address at which it is established;
(3) the details of the firm, including its e-mail address, which allow it to be contacted rapidly and communicated with in a direct and effective manner;
(4) an appropriate statutory status disclosure statement (GEN 4 Annex 1 R), together with a statement which explains that it is on the FSA register and includes its FSA register number;
(5) if it is a professional firm, or a person regulated by the equivalent of a designated professional body in another EEA State:

(a) the name of the professional body (including any designated professional body) or similar institution with which it is registered;
(b) the professional title and the EEA State where the professional title was granted;
(c) a reference to the applicable professional rules in the EEA State of establishment and the means to access them; and

(6) where the firm undertakes an activity that is subject to VAT, its VAT number.

[Note: article 5(1) of the E-Commerce Directive]

01/11/2007

MCOB 2.7A.3

If a firm refers to price, it must do so clearly and unambiguously, indicating whether the price is inclusive of tax and delivery costs.

[Note: article 5(2) of the E-Commerce Directive]

01/11/2007

MCOB 2.7A.4

A firm must ensure that commercial communications which are part of, or constitute, an information society service, comply with the following conditions:

(1) the commercial communication must be clearly identifiable as such;
(2) the person on whose behalf the commercial communication is made must be clearly identifiable;
(3) promotional offers must be clearly identifiable as such, and the conditions that must be met to qualify for them must be easily accessible and presented clearly and unambiguously; and
(4) promotional competitions or games must be clearly identifiable as such, and the conditions for participation must be easily accessible and presented clearly and unambiguously.

[Note: article 6 of the E-Commerce Directive]

01/11/2007

MCOB 2.7A.5

An unsolicited commercial communication sent by e-mail by a firm established in the United Kingdom must be identifiable clearly and unambiguously as an unsolicited commercial communication as soon as it is received by the recipient.

[Note: article 7(1) of the E-Commerce Directive]

01/11/2007

Requirements relating to the placing and receipt of orders

MCOB 2.7A.6

A firm must (except when otherwise agreed by parties who are not consumers):

(1) give an ECA recipient at least the following information, clearly, comprehensibly and unambiguously, and before the order is placed by the recipient of the service:

(a) the different technical steps to follow to conclude the contract;
(b) whether or not the concluded contract will be filed by the firm and whether it will be accessible;
(c) the technical means for identifying and correcting input errors before the placing of the order; and
(d) the languages offered for the conclusion of the contract;

(2) indicate any relevant codes of conduct to which it subscribes and information on how those codes can be consulted electronically;
(3) (when an ECA recipient places an order through technological means), acknowledge the receipt of the recipient's order without undue delay and by electronic means (an order and an acknowledgement of receipt are deemed to be received when the parties to whom they are addressed are able to access them); and
(4) make available to an ECA recipient, appropriate, effective and accessible technical means allowing the recipient to identify and correct input errors before the placing of an order.

[Note: article 10(1) and (2) and 11(1) and (2) of the E-Commerce Directive]

01/11/2007

MCOB 2.7A.7

Contractual terms and conditions provided by a firm to an ECA recipient must be made available in a way that allows the recipient to store and reproduce them.

[Note: article 10(3) of the E-Commerce Directive]

01/11/2007

Exception: contract concluded by e-mail

MCOB 2.7A.8

The requirements relating to the placing and receipt of orders do not apply to contracts concluded exclusively by exchange of e-mail or by equivalent individual communications.

[Note: article 10(4) and 11(3) of the E-Commerce Directive]

01/11/2007

MCOB 2.8

Record keeping

01/12/2004

Purpose

MCOB 2.8.1

MCOB 2.8 provides details of the standard expected of firms where there is an obligation in MCOB requiring firms to maintain adequate records to evidence compliance. An overall view of the record keeping requirements in MCOB is in MCOB Sch 1.

31/10/2004

Accessibility of records

MCOB 2.8.2

The records required in MCOB must be readily accessible for inspection by the FSA.

31/10/2004

MCOB 2.8.3

A record would be 'readily accessible' if it were available for inspection within two business days of the request being received.

31/10/2004

MCOB 2.8.4

(1) A firm may arrange for records to be kept in such form as it chooses, provided the record is readily accessible for inspection by the FSA.
(2) Where a firm chooses to maintain records in electronic form, it should take reasonable steps to ensure that:

(a) the electronic record accurately reflects the original information; and
(b) the electronic record has not been subject to unauthorised or accidental alteration.

31/10/2004

MCOB 2.8.5

Each rule in MCOB that requires a record also sets out a period that the record must be kept for. While not a requirement of MCOB, firms may choose to keep records for longer periods, for example, where there is the possibility of customer complaint or legal action against the firm.

31/10/2004

Home purchase plans

MCOB 2.8.6

This sourcebook does not specify detailed record keeping requirements for a firm that carries on a home purchase activity or that communicates or approves a financial promotion of a home purchase plan (but note the high-level record-keeping provisions in the Senior Management Arrangements, Systems and Controls sourcebook).

06/04/2007

MCOB 2 Annex 1G

Form of joint instruction letter

30/06/2010

This Annex belongs to MCOB 2.6A.13A G. MCOB 2 Annex 1G - Form of joint instruction letter.

30/06/2010

Export chapter as

Legal Instruments that change this Chapter Conduct of business standards: general

MCOB 3

Financial Promotion of qualifying credit, home reversion plans and regulated sale and rent back agreements

MCOB 3.1

Application: who?

01/12/2004

MCOB 3.1.1

This chapter applies to every firm which communicates or approves a financial promotion of qualifying credit, a home reversion plan or a regulated sale and rent back agreement.

30/06/2010
Past version of MCOB 3.1.1 before 30/06/2010

MCOB 3.1.2

This chapter applies generally to firms in relation to all financial promotions of qualifying credit, a home reversion plan or a regulated sale and rent back agreement. This wide application is however cut back by MCOB 3.2 (Application: what?) and MCOB 3.3 (Application: where?) which limit the application of this chapter for:

(1) financial promotions which would fall within the scope of the exemptions in the Financial Promotion Order or the additional exemptions set out in MCOB 3.2.5 R (Applications: what? Exemptions); and
(2) financial promotions to persons outside the United Kingdom.

30/06/2010
Past version of MCOB 3.1.2 before 30/06/2010

MCOB 3.1.3

MCOB 3.1.1 R means that:

(1) this chapter applies not only to financial promotions for regulated mortgage contracts, but also to promotions for qualifying credit; and
(2) this chapter applies to all aspects of a promotion by a firm of products which combine unsecured and secured lending.

31/10/2004

MCOB 3.1.4

In relation to MCOB 3.1.3 G(2), an example would be a promotion for a mortgage product, one feature of which was an unsecured lending facility or reserve.

31/10/2004

MCOB 3.1.5

Under section 39(3) of the Act, a firm is responsible for financial promotions communicated by its appointed representatives when acting as such.

31/10/2004

MCOB 3.1.7

A financial promotion may relate to other controlled investments in addition to qualifying credit, home reversion plans and regulated sale and rent back agreements, for example a building society leaflet which describes the range of mortgage, savings and insurance products it provides. In such cases, the financial promotion rules in this and other sourcebooks will each apply as relevant.

30/06/2010
Past version of MCOB 3.1.7 before 30/06/2010

MCOB 3.1.8

As a result of articles 90 and 91 of the Regulated Activities Order:

(1) a financial promotion of qualifying credit is not subject to the advertising provisions of the Consumer Credit Act 1974, unless it is an exempt generic promotion; and
(2) where a firm makes a communication, which consists of a financial promotion of qualifying credit and information relating to a different form of lending that is not qualifying credit (for example an unsecured personal loan), the content of the latter will need to comply with the relevant advertising provisions of the Consumer Credit Act 1974.

06/04/2007
Past version of MCOB 3.1.8 before 06/04/2007

Authorised professional firms

MCOB 3.1.9

(1) Except for MCOB 3.6.17 R to MCOB 3.6.25 R (Annual percentage rate (APR)), MCOB 3 does not apply to an authorised professional firm in relation to the communication of a financial promotion if the following conditions are satisfied:

(a) the firm's main business must be the practice of its profession (see IPRU(INV) 2.1.2R(3));
(b) the financial promotion must be made for the purposes of and incidental to the promotion or provision by the firm of:

(i) its professional services; or
(ii) its non-mainstream regulated activities (see PROF 5.2 (Nature of non-mainstream activities)); and

(c) the financial promotion must not be communicated on behalf of another person who would not be able lawfully to communicate the financial promotion if he were acting in the course of business.

(2) In (1)(b)(i), 'professional services' means services:

(a) which do not constitute a regulated activity; and
(b) the provision of which is supervised and regulated by a designated professional body.

06/04/2007
Past version of MCOB 3.1.9 before 06/04/2007

MCOB 3.1.10

Authorised professional firms are reminded that in circumstances in which MCOB 3 does not apply to the firm MCOB 2.2.6 R (Clear fair and not misleading communication) may apply.

31/10/2004

Nationals of other EEA States

MCOB 3.1.11

A national of an EEA State (other than the United Kingdom) wishing to take advantage of the exemption in article 36 of the Financial Promotion Order in respect of a financial promotion of qualifying credit, a home reversion plan or a regulated sale and rent back agreement should act in conformity with the rules in this chapter.

30/06/2010
Past version of MCOB 3.1.11 before 30/06/2010

Illustrative examples of qualifying credit promotions

MCOB 3.1.12

MCOB 3 Annex 1 gives examples of financial promotion of qualifying credit that would satisfy some of the provisions of MCOB 3.

06/04/2007
Past version of MCOB 3.1.12 before 06/04/2007

MCOB 3.2

Application: what?

01/12/2004

Application for a financial promotion of qualifying credit

MCOB 3.2.-3

This chapter applies to the communication or approval of a financial promotion of qualifying credit as follows:

Application, purpose and general

MCOB 3.1 to MCOB 3.5

Form and content of non-real time qualifying credit promotions

MCOB 3.6

Unsolicited real time promotions of qualifying credit or home reversion plans

MCOB 3.7

Form and content of real time qualifying credit promotions

MCOB 3.8

Confirmation of compliance: financial promotions of qualifying credit or home reversion plans

MCOB 3.9

Records: non-real time financial promotions of qualifying credit or home reversion plans

MCOB 3.10

Communication and approval of qualifying credit promotions for an overseas person or an unauthorised person

MCOB 3.11

The Internet and other electronic media

MCOB 3.12

06/04/2007

Application for a financial promotion of a home reversion plan

MCOB 3.2.-2

This chapter applies to the communication or approval of a financial promotion of a home reversion plan as follows:

Application, purpose and general

MCOB 3.1 to MCOB 3.5

Form and content of non-real time qualifying credit promotions

MCOB 3.6 in accordance with MCOB 3.8A

Unsolicited real time financial promotions of qualifying credit or home reversion plans

MCOB 3.7

Form and content of financial promotions of home reversion plans

MCOB 3.8A

Confirmation of compliance: financial promotions of qualifying credit or home reversion plans

MCOB 3.9

Records: non-real time financial promotions of qualifying credit or home reversion plans

MCOB 3.10

The Internet and other electronic media

MCOB 3.12

06/04/2007

Application for a financial promotion of a regulated sale and rent back agreement

MCOB 3.2.-2A

This chapter applies to the communication or approval of a financial promotion of a regulated sale and rent back agreement as follows:

Application, purpose and general

MCOB 3.1 to MCOB 3.5

Form and content of non-real time qualifying credit promotions

MCOB 3.6 in accordance with MCOB 3.8B

Unsolicited real time financial promotions of qualifying credit or regulated sale and rent back agreements

MCOB 3.7

Form and content of financial promotions of regulated sale and rent back agreements

MCOB 3.8B

Confirmation of compliance: financial promotions of qualifying credit or regulated sale and rent back agreements

MCOB 3.9

Records: non-real time financial promotions of qualifying credit or regulated sale and rent back agreements

MCOB 3.10

The Internet and other electronic media.

MCOB 3.12

30/06/2010

Application for a financial promotion of a home purchase plan

MCOB 3.2.-1

The rules in this chapter do not apply to the communication or approval of a financial promotion of a home purchase plan. However, the clear, fair and not misleading standard still applies as does certain relevant guidance from this chapter (see MCOB 2.2).

06/04/2007

What do "communicate", "approve" and "financial promotion" mean?

MCOB 3.2.1

(1) The rules in this chapter adopt various concepts from the restriction on financial promotion by unauthorised persons in section 21(1) of the Act (Restrictions on financial promotion). Guidance on that restriction is contained in PERG 8 (Financial promotion and related activities) and that guidance will be relevant to interpreting these rules. In particular, guidance on the meaning of:

(a) 'communicate' is in PERG 8.6 (Communicate); and
(b) 'invitation or inducement' and 'engage in investment activity' (two elements which, with 'communicate', make up the definition of 'financial promotion') is in PERG 8.4 (Invitation or inducement) and PERG 8.7 (Engage in investment activity).

(2) Guidance on the approval of a financial promotion of qualifying credit is in MCOB 3.11.1 G (Approval of qualifying credit promotions).

06/04/2007
Past version of MCOB 3.2.1 before 06/04/2007

Media of communication

MCOB 3.2.2

(1) There is no restriction on the media of communication to which this chapter applies. It applies to a financial promotion communicated by any means, including by way of printed advertising, radio and television broadcasts, a personal visit, a telephone call, an e-mail, the Internet and electronic media such as digital and other forms of interactive television or media. Both solicited and unsolicited communications are covered.
(2) Financial promotions may be communicated for example, by means of:

(a) product brochures;
(b) general advertising in magazines, newspapers, radio and television programmes and websites;
(c) mailshots (whether distributed by post, facsimile, e-mail or other media);
(d) telemarketing activities, such as telephone calls made by call centres;
(e) written correspondence, telephone calls and face-to-face discussions with customers;
(f) sales aids which themselves constitute a financial promotion;
(g) presentations to groups of customers; and
(h) other publications, which may contain non-personal recommendations as to obtaining qualifying credit or entering into a home reversion plan.

06/04/2007
Past version of MCOB 3.2.2 before 06/04/2007

MCOB 3.2.3

Guidance on the use of the Internet for communicating financial promotions is in MCOB 3.12 (The Internet and other electronic media) and PERG 8.22 (The Internet)

06/04/2007
Past version of MCOB 3.2.3 before 06/04/2007

Exemptions

MCOB 3.2.4

This chapter does not apply to a firm in relation to a financial promotion of qualifying credit of a kind listed in MCOB 3.2.5 R, except that if the firm approves the financial promotion, the following apply:

(1) MCOB 3.1 to MCOB 3.5 (Application, Purpose and General);
(2) MCOB 3.6.3 R (Clear, fair and not misleading);
(3) MCOB 3.11.1 G to MCOB 3.11.4 G (Approval of qualifying credit promotions; No approval of real time qualifying credit promotions; Approval of qualifying credit promotions when not all the rules apply); and
(4) if the firm approves a non-real time financial promotion of qualifying credit by an overseas person MCOB 3.11.5 R (Non-real time qualifying credit promotions for overseas persons) applies.

06/04/2007
Past version of MCOB 3.2.4 before 06/04/2007

MCOB 3.2.4A

This chapter does not apply to a firm in relation to a financial promotion of a home reversion plan or a regulated sale and rent back agreement of a kind listed in MCOB 3.2.5 R, unless the firm approves the financial promotion. However, for non-real time financial promotions of the kind listed in MCOB 3.2.5 R, the requirements in MCOB 3.8B.5 R apply in relation to how a regulated sale and rent back agreement can be described. Advertisements for other products that could result in the conclusion of regulated sale and rent back agreements must carry the sale and rent back risk warning (MCOB 3.8B.4 R).

30/06/2010
Past version of MCOB 3.2.4A before 30/06/2010

MCOB 3.2.5

This table belongs to MCOB 3.2.4 R and MCOB 3.2.4A R.

Exemptions

This chapter does not apply to the following:

(1)

an illustration produced in accordance with the requirements of MCOB 5, MCOB 6, MCOB 7 or MCOB 9;

(2)

a financial promotion which contains only one or more of the following:

(a)

the name of the firm (or its appointed representative);

(b)

a logo;

(c)

a contact point (address (including an e-mail address), telephone or facsimile number);

(d)

a brief, factual statement of the firm's (or its appointed representative's) main occupation;

(3)

a financial promotion which can lawfully be communicated by an unauthorised person without approval;

(4)

a financial promotion communicated from outside the United Kingdom which would be exempt under articles 30, 31, 32 or 33 of the Financial Promotion Order (Overseas communicators) if the office from which the financial promotion is communicated were a separate unauthorised person (but see GEN 4.4.1R (Business for private customers from non-UK offices));

06/04/2007
Past version of MCOB 3.2.5 before 06/04/2007

MCOB 3.2.6

MCOB 3.2.5 R(2) exempts a financial promotion made by a firm or an appointed representative which refers to its activities only in general terms in image or brand advertising. The items identified in MCOB 3.2.5 R(2) do not enable detailed information to be given about the qualifying credit, home reversion plan or regulated sale and rent back agreement available from the firm. Thus firms should avoid the use of names, logos or addresses, for example, which attempt to convey additional product or cost-related information.

30/06/2010
Past version of MCOB 3.2.6 before 30/06/2010

Combination of exemptions

MCOB 3.2.7

A firm may rely on more than one exemption (and also on MCOB 3.3.1 R (Application: where?)) in relation to the same financial promotion.

06/04/2007
Past version of MCOB 3.2.7 before 06/04/2007

Other relevant handbook rules

MCOB 3.2.8

Firms are reminded that financial promotion (including those which are exempt) may be subject to more general rules, including Principle 7 (Communications with clients), SYSC 3 to SYSC 10 (Systems and controls) and MCOB 2.2.6 R (Clear, fair and not misleading communication).

06/04/2007
Past version of MCOB 3.2.8 before 06/04/2007

MCOB 3.2.9

Firms are reminded that if in the course of making a financial promotion of any kind an adviser gives specific advice on a home finance transaction to a customer about the suitability of a product for that individual, the adviser in giving the advice is subject to the rules, as appropriate, on advising and selling in MCOB 4 (Advising and selling standards) and MCOB 8 (Equity release: advising and selling standards).

06/04/2007
Past version of MCOB 3.2.9 before 06/04/2007

MCOB 3.3

Application: where?

01/12/2004

Territorial Scope

MCOB 3.3.1

This chapter applies to a firm in relation to:

(1) the communication of a financial promotion to a person in the United Kingdom;
(2) the communication of an unsolicited real time financial promotion of qualifying credit, a home reversion plan or a regulated sale and rent back agreement, unless it is made from a place, and for the purposes of a business which is only carried on, outside the United Kingdom;
(3) the approval of a non-real time financial promotion of qualifying credit, a home reversion plan or a regulated sale and rent back agreement for communication to a person in the United Kingdom; and
(4) the communication or approval for communication of a financial promotion that is an electronic commerce communication to a person in an EEA state other than in the United Kingdom.

30/06/2010
Past version of MCOB 3.3.1 before 30/06/2010

MCOB 3.3.2

(1) The application under MCOB 3.3.1 R is relevant both when a firm communicates a financial promotion itself and when a firm approves a non-real time financial promotion for communication by others. But see also MCOB 3.3.3 R (Exceptions to territorial scope: rules without territorial limitation) for approval of financial promotions).
(2) The exemptions in MCOB 3.2.5 R (Application: what?; Exemptions) also incorporate some territorial elements. In particular, the exemption for financial promotions originating outside the United Kingdom (section 21(3) of the Act (Restrictions on financial promotion)) (see MCOB 3.2.5 R (4)), the exemptions for overseas communicators (see MCOB 3.2.5 R (4)), the exemption for electronic commerce communications made from an establishment in an EEA State other than the United Kingdom to an ECA recipient in the United Kingdom (see PERG 8.12.38G (Incoming electronic commerce communication (article 20B)).
(3) [deleted]

01/11/2007
Past version of MCOB 3.3.2 before 01/11/2007

Exceptions to territorial scope: rules without territorial limitation for approval of financial promotions

MCOB 3.3.3

Subject to MCOB 3.3.5 R the following parts of this chapter apply without any territorial limitation if a firm approves a financial promotion of qualifying credit, a home reversion plan or a regulated sale and rent back agreement:

(1) MCOB 3.1 to MCOB 3.5 (Application, Purpose and General);
(2) rules requiring a financial promotion to be clear, fair and not misleading (see MCOB 3.6.3 R (1) in relation to qualifying credit, MCOB 3.8A.1 R in relation to a home reversion plan and MCOB 3.8B.1 R in relation to a regulated sale and rent back agreement); and
(3) the provisions regarding approval of financial promotions (except those relating to approval of financial promotions of qualifying credit provided by an overseas person) (see MCOB 3.11.1 G to MCOB 3.11.4 G and MCOB 3.8A.6 R).

30/06/2010
Past version of MCOB 3.3.3 before 30/06/2010

MCOB 3.3.4

There is no need for a financial promotion which is indicated in MCOB 3.3.1 R to be outside the territorial scope of the application of MCOB 3 to be approved before being communicated by an unauthorised person (because the restriction in section 21 of the Act (Restrictions on financial promotion) does not apply). If a firm nevertheless approves such a financial promotion, it must comply with the rules indicated. However, a firm must not approve a real time financial promotion (see MCOB 3.11.2 R (No approval of real time qualifying credit promotions) or MCOB 3.8A.6 R (No approval of real time financial promotions of a home reversion plan)).

06/04/2007
Past version of MCOB 3.3.4 before 06/04/2007

Exceptions to territorial scope: financial promotions of qualifying credit relating to distance contracts

MCOB 3.3.5

(1) Notwithstanding MCOB 3.3.1 R and MCOB 3.3.3 R, where a firm which satisfies the conditions in (2) communicates a financial promotion of qualifying credit, the rules in (3) do not apply.
(2) The conditions are that:

(a) the firm communicates the financial promotion of qualifying credit from an establishment maintained by the firm in an EEA State other than the United Kingdom, and not from an establishment maintained by the firm in the United Kingdom or outside the EEA;
(b) either that EEA State:

(i) has implemented the Distance Marketing Directive; or
(ii) has obligations in its domestic law corresponding to those provided for by the Distance Marketing Directive;

(c) the financial promotion of qualifying credit relates, exclusively, to a distance contract, for the conclusion of which the obligations provided for by the Distance Marketing Directive (or corresponding obligations) are applied by that State; and
(d) the firm is a national of an EEA State or a company or firm mentioned in article 54 of the Treaty.

(3) The rules which do not apply are:

(a) MCOB 3.6.1 R (Name and contact point);
(b) MCOB 3.6.13 R (Required risk statements);
(c) MCOB 3.6.15 R (Transient advertising);
(d) MCOB 3.6.26 R (Multi-rate mortgages);
(e) MCOB 3.6.27 R (Fees for advice or arranging); and
(f) MCOB 3.8.2 R (3) and (4) (Form and content of real time qualifying credit promotions).

01/12/2009
Past version of MCOB 3.3.5 before 01/12/2009

Meaning of 'communicated to a person inside or outside the United Kingdom'

MCOB 3.3.6

For the purposes of this chapter:

(1) a financial promotion is communicated to a person outside the United Kingdom if it is:

(a) made to a person who receives it outside the United Kingdom; or
(b) directed only at persons outside the United Kingdom; and

(2) a financial promotion is communicated to a person inside the United Kingdom if it is communicated to a person other than as described in (1);

and see MCOB 3.3.7 R and MCOB 3.5.6 R which amplify this rule.

06/04/2007
Past version of MCOB 3.3.6 before 06/04/2007

MCOB 3.3.7

Meaning of "'directed only at persons outside the United Kingdom'

(1) If the conditions set out in 4(a), (b), (c) and (d) are met, a financial promotion directed from a place inside the United Kingdom will be regarded as directed only at persons outside the United Kingdom.
(2) If the conditions set out in 4(c) and (d) are met, a financial promotion directed from a place outside the United Kingdom will be regarded as directed only at persons outside the United Kingdom.
(3) In any other case, where one or more of the conditions in 4(a) to (e) is met, that fact will be taken into account in determining whether a financial promotion is directed only at persons outside the United Kingdom (but a financial promotion may still be regarded as directed only at persons outside the United Kingdom even if none of these conditions is met).
(4) The conditions are that:

(a) the financial promotion is accompanied by an indication that it is directed only at persons outside the United Kingdom;
(b) the financial promotion is accompanied by an indication that it must not be acted upon by persons in the United Kingdom;
(c) the financial promotion is not referred to in, or directly accessible from, any other financial promotion which is made to a person or directed at persons in the United Kingdom by the same person;
(d) there are in place proper systems and procedures to prevent recipients in the United Kingdom (other than those to whom the financial promotion might otherwise lawfully have been made) obtaining the product to which the financial promotion relates, from the person directing the financial promotion, a close relative of his or a member of the same group;
(e) the financial promotion is included in:

(i) a website, newspaper, journal, magazine or periodical publication which is principally accessed in or intended for a market outside the United Kingdom; and
(ii) a radio or television broadcast or teletext service transmitted principally for reception outside the United Kingdom.

06/04/2007
Past version of MCOB 3.3.7 before 06/04/2007

MCOB 3.4

Purpose

01/12/2004

MCOB 3.4.1

(1) Section 21(1) of the Act (Restriction on financial promotion) imposes a restriction on the communication of financial promotions by unauthorised persons. A person must not, in the course of business, communicate a financial promotion unless:

(a) he is an authorised person; or
(b) the content of the financial promotion is approved by an authorised person.

(2) However, the Financial Promotion Order exempts from the restriction created by section 21(1) of the Act certain types of financial promotions.

06/04/2007
Past version of MCOB 3.4.1 before 06/04/2007

MCOB 3.4.2

(1) The purpose of this chapter is to provide rules and guidance for a firm which wishes to communicate or approve a financial promotion of qualifying credit, a home reversion plan or a regulated sale and rent back agreement.
(2) This chapter amplifies, for activities within its scope Principle 6 (Customers' interests) and Principle 7 (Communications with clients).

30/06/2010
Past version of MCOB 3.4.2 before 30/06/2010

MCOB 3.5

General

01/12/2004

MCOB 3.5.1

[deleted - see application tables in MCOB 3.2]

06/04/2007
Past version of MCOB 3.5.1 before 06/04/2007

Other regulations and guidelines

MCOB 3.5.3

A firm communicating a financial promotion may also be subject to other regulations and guidelines, outside the remit of the FSA, such as:

(1) the codes issued from time to time by the Advertising Standards Authority, the Independent Television Commission and the Radio Authority;
(2) regulations of any overseas regulator (where relevant) if the firm intends to market from the United Kingdom into any other country;
(3) the Privacy and Electronic Communications (EC Directive) Regulations 2003
(4) the Timeshare Act 1992, as amended by the Timeshare Regulations 1997 (SI 1997/1081); and
(5) the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277).

06/10/2010
Past version of MCOB 3.5.3 before 06/10/2010

'Real time' and 'non-real time' qualifying credit promotions

MCOB 3.5.4

This chapter draws a distinction between real time and non-real time financial promotions. Guidance on the meaning of those expressions, which are based upon article 7 of the Financial Promotion Order, is contained in PERG 8.10.2G (Real time v. non-real time promotions).

06/04/2007
Past version of MCOB 3.5.4 before 06/04/2007

MCOB 3.5.5

(1) A 'real time financial promotion' is a financial promotion which is communicated in the course of a personal visit, telephone conversation or other interactive dialogue.
(2) A 'non-real time financial promotion' is a financial promotion that is not a real time financial promotion. It includes a financial promotion made by letter, e-mail or contained in a newspaper, journal, magazine, other periodical publication, website, television or radio programme, or teletext service.
(3) The following are to be regarded as indications that a financial promotion is a non-real time financial promotion:

(a) the financial promotion is communicated to more than one person in identical terms (save for details of the recipient's identity);
(b) the financial promotion is communicated by way of a system which in the normal course constitutes or creates a record of the communication which is available to the recipient to refer to at a later time; and
(c) the financial promotion is communicated by way of a system which in the normal course does not enable or require the recipient to respond immediately to it.

06/04/2007
Past version of MCOB 3.5.5 before 06/04/2007

Meaning of 'made', 'directed at' and 'recipient' in MCOB 3

MCOB 3.5.6

(In accordance with article 6 of the Financial Promotion Order (Interpretation: communications)) any reference in this chapter to:

(1) a communication being made to another person is a reference to a communication being addressed, whether verbally or in legible form, to a particular person or persons (for example, where it is contained in a telephone call or letter);
(2) a communication being directed at persons is a reference to a communication being addressed to persons generally (for example where it is contained in a television broadcast or website); and
(3) a 'recipient' of a communication is the person to whom the communication is made or, in the case of a non-real time financial promotion which is directed at persons generally, any person who reads or hears the communication.

06/04/2007
Past version of MCOB 3.5.6 before 06/04/2007

MCOB 3.6

Form and content of non-real time qualifying credit promotions

01/12/2004

Name and contact point

MCOB 3.6.1

A non-real time financial promotion must contain the name of the firm or its appointed representative and either an address or a contact point from which an address is available.

06/04/2007
Past version of MCOB 3.6.1 before 06/04/2007

MCOB 3.6.2

(1) For the purposes of MCOB 3.6.1 R, the name may be a trading name or shortened version of the legal name of the firm (although other legislation, for example, the Companies Act 2006, may require a firm to include information not required by this rule).
(2) The type of contact point envisaged for a firm by MCOB 3.6.1 R is an e-mail address or telephone or facsimile number, where a customer can contact the firm for its address.
(3) A firm is not required in a financial promotion which it communicates or approves to name the FSA as its regulator. However, to ensure the financial promotion is clear, fair and not misleading, if the firm chooses to name the FSA as its regulator and the financial promotion refers to matters not regulated by the FSA, it should also make clear that those matters are not regulated by the FSA. This might arise, for example, where the communication included both a financial promotion of qualifying credit and a promotion for unsecured lending.

01/10/2009
Past version of MCOB 3.6.2 before 01/10/2009

Clear, fair and not misleading

MCOB 3.6.3

(1) A firm must be able to show that it has taken reasonable steps to ensure that a non-real time financial promotion is clear, fair and not misleading.
(2) A non-real time financial promotion which includes a comparison or contrast must:

(a) compare credit meeting the same needs or which is intended for the same purpose;
(b) objectively compare one or more material, relevant, verifiable and representative features of that credit, which may include price;
(c) not create confusion in the market place between the firm itself (or the person whose qualifying credit promotion it approves) and a competitor or between the firm's trademarks, trade names, other distinguishing marks, qualifying credit (or those of the person whose qualifying credit promotion it approves) and those of a competitor;
(d) not discredit or denigrate the trademarks, trade names, other distinguishing marks, qualifying credit, services, activities or circumstances of a competitor;
(e) not take unfair advantage of the reputation of a trademark, trade name or other distinguishing marks of a competitor;
(f) not present qualifying credit as an imitation or replica of qualifying credit bearing a protected trademark or trade name; and
(g) indicate in a clear and unequivocal way in any comparison referring to a special offer the date on which the offer ends or, where appropriate, that the special offer is subject to the availability of the qualifying credit, and, where the special offer has not yet begun, the date of the start of the period during which the special price or other specific conditions will apply.

MCOB 3.6.4

(1) A firm should take reasonable steps to ensure that, for a non-real time financial promotion:

(a) it does not omit any matters the omission of which causes the financial promotion of qualifying credit not to be clear, fair and not misleading;
(b) if it describes a feature of any qualifying credit, it gives no less prominence to the possible disadvantages than to the benefits associated with that feature;
(c) it uses plain and intelligible language, and is easily legible (or, in the case of oral promotions, clearly audible);
(d) the accuracy of all statements of fact in it can be substantiated;
(e) its promotional purpose is not in any way disguised or misrepresented;
(f) any statement of fact, promise or prediction is clear, fair and not misleading and any relevant assumptions are clearly and prominently disclosed (but a firm is not required to explain, on the face of the financial promotion of qualifying credit, the basis on which a stated APR is calculated: see MCOB 3.6.18 G);
(g) any statement of opinion is honestly held and, unless consent is impracticable, given with the written consent of the person concerned;
(h) the facts on which any comparison or contrast is made are verified, or, alternatively, that relevant assumptions are prominently disclosed and that the comparison or contrast is presented in a fair and balanced way, which is not misleading and includes all factors which are relevant to the comparison or contrast;
(i) it does not contain any false indications, in particular as to:

(i) the firm's independence;
(ii) the firm's resources and scale of activities; or
(iii) the scarcity of any qualifying credit;

(j) the design, content or format does not in any way disguise, obscure or diminish the significance of any statement, warning or other matter which the financial promotion of qualifying credit is required by this chapter to contain;
(k) it does not include any reference to approval by the FSA or any government body, unless such approval has been obtained in writing from the FSA or that body (see also GEN 1.2 (Referring to approval by the FSA));
(l) where it contains information required as a consequence of the following provisions, the items of information provided in relation to each provision appear in proximity to each other:

(i) MCOB 3.6.11 R;
(ii) MCOB 3.6.13 R (Required risk statements), unless MCOB 3.6.15 R(transient advertising) applies;
(iii) MCOB 3.6.17 R (Annual percentage rate (APR));
(iv) MCOB 3.6.25 R;
(v) MCOB 3.6.26 R (Multi-rate mortgages); and
(vi) MCOB 3.6.27 R (Fees for advice or arranging).

(a) Contravention of MCOB 3.6.4 E(1) may be relied on as tending to show contravention of MCOB 3.6.3 R(1).
(b) Compliance with MCOB 3.6.4 E(1) may be relied on as tending to show compliance with MCOB 3.6.3 R(1).

06/04/2007
Past version of MCOB 3.6.4 before 06/04/2007

MCOB 3.6.5

In relation to MCOB 3.6.3 R:

(1) firms should avoid the use of small print to qualify prominent claims;
(2) if a non-real time financial promotion includes information on the performance of the firm, on conditions in the market, interest rates, APRs or other price information this information should be relevant and recent. Firms should therefore avoid including this information in financial promotions which have a long shelf-life without a clear and prominent warning that the information can become outdated; and
(3) firms must ensure that an adequate description of mortgage products is given. For example, firms should take care to ensure that where a rate is variable at any time during the term of the mortgage, the content of the financial promotion does not imply the rate may be fixed.

06/04/2007
Past version of MCOB 3.6.5 before 06/04/2007

MCOB 3.6.6

The effect of MCOB 3.6.4 E(1)(b) will depend upon the content of the promotion. A non-exhaustive list of examples satisfying MCOB 3.6.4 E(1)(b) follows:

(1) a promotion which, when describing any cashback offered to the customer, also clearly refers to any relevant conditions, such as a requirement to pay back some or all of the cashback on early repayment of the mortgage;
(2) a promotion which, when describing any fixed or discount rate, also clearly states the duration of any early repayment charges;
(3) a promotion which, when describing any reduction in regular payments following from the re-arrangement of existing loans, also clearly indicates any increase in the total cost and any extension to the repayment period for the customer;
(4) a promotion which, when describing any possible monetary saving, also clearly states how this could be achieved;
(5) a promotion which, when including references to non-standard services or facilities, also clearly states that an additional fee may be payable for these; and
(6) a promotion which, when it includes an indication of an initial payment holiday (for example, 'pay nothing for 3 months'), also makes clear whether or not interest will be charged during this period.

31/10/2004

MCOB 3.6.7

The requirement in MCOB 3.6.4 E(1)(l) that certain information must be given in proximity means, for example, in relation to printed qualifying credit promotions, that this information is all visible at the same time.

31/10/2004
Future version of MCOB 3.6.7 after 01/10/2012

MCOB 3.6.8

In ensuring a financial promotion is clear fair and not misleading, a firm must ensure that the financial promotion does not contain any of the following words or expressions, unless the relevant condition applies:

(1) the word 'overdraft' or any similar expression as describing any agreement for running-account credit except an agreement enabling the customer to overdraw on a current account;
(2) the expression 'interest free' or any similar expression (such as '0% Finance' or 'Interest Free Option') indicating that a customer is liable to pay no greater amount in respect of a transaction financed by credit than the customer would be liable to pay as a cash purchaser in relation to the same transaction, except where:

(a) the total amount payable by the customer does not exceed the cash price; or
(b) MCOB 3.6.26 R (Multi-rate mortgages) applies, in which case the expression may be used in respect of any rate of charge of 0% provided that during the period in which the rate applies there is no interest charged and no increase in the amount of the mortgage loan.

(3) the expression 'no deposit' or any similar expression, except where no advance payments are required to be made on the loan;
(4) the expression 'mortgage guaranteed', 'pre-cleared' or any similar expression, unless the financial promotion invites entry into a contract that is free of any conditions regarding the credit status of the customer; and
(5) the expression 'gift', 'present' or any similar expressions, unless there are no conditions which would require the customer to return the money or items that are the subject of the claim.

06/04/2007
Past version of MCOB 3.6.8 before 06/04/2007

MCOB 3.6.9

A non-real time financial promotion must:

(1) describe any early repayment charge as an 'early repayment charge' and not use any other expression to describe such charges;
(2) describe any higher lending charge as a 'higher lending charge' and not use any other expression to describe such charges;
(3) not contain the 'key facts' logo unless it is required by a rule; and
(4) describe any lifetime mortgage as a 'lifetime mortgage' and not use any other expression to describe such a mortgage.

06/04/2007
Past version of MCOB 3.6.9 before 06/04/2007

MCOB 3.6.10

(1) It cannot be assumed that customers necessarily have an understanding of the qualifying credit being promoted. If a non-real time financial promotion is specially designed for a targeted collection of customers who are reasonably believed to have particular knowledge of the qualifying credit being promoted, this fact should be made clear.
(2) In relation to quotations of opinion:

(a) where only part of an opinion is quoted, it should nevertheless be a fair representation; and
(b) any connection between the holder of the opinion and the firm should be made clear.

06/04/2007
Past version of MCOB 3.6.10 before 06/04/2007

MCOB 3.6.11

A non-real time financial promotion that features qualifying credit which is conditional upon the customer obtaining one or more further products from a specific firm (or its agents or associates) must prominently state the compulsory nature of these purchases.

06/04/2007
Past version of MCOB 3.6.11 before 06/04/2007

MCOB 3.6.12

MCOB 3.6.11 R is concerned with ensuring that customers are adequately informed, at an early stage, as to the existence of any tied products or services. However, it does not introduce equivalent disclosure requirements for services or products that must be obtained as a condition for the making of the loan, but where the customer has a free choice as to the supplier.

31/10/2004

Required risk statements

MCOB 3.6.13

A non-real time financial promotion must, unless the transient advertising rule applies, prominently contain one or more of the following statements in the circumstances described:

(1) where it relates to a lifetime mortgage: 'This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.' If the promotion also relates to a home reversion plan the statement may be adapted to the extent necessary to comply with the equivalent requirement for a home reversion plan (see MCOB 3.8A.3R (2)(a));
(2) where it refers to paying off unsecured debts (for example, credit cards, personal loans or overdrafts) by taking out qualifying credit: 'Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.'
(3) in all cases except (1) and (2): 'Your home may be repossessed if you do not keep up repayments on your mortgage.'; or if it refers in whole or in part to qualifying credit secured on property which is not the customer's home the statement may be amended but only to the extent necessary in order to reflect that fact.
(4) where the mortgage will be denominated in a currency other than sterling: 'Changes in the exchange rate may increase the sterling equivalent of your debt.'
(5) where more than one of the statements in (1) to (4) applies, each relevant statement should be included. In such cases, the statement set out in (1), (2) or (3) should precede that in (4).
(6) where a non-real time financial promotion relates to both qualifying credit and credit which is not qualifying credit the statements required by (2) or (3) may be modified by replacing your mortgage with a mortgage or any other debt secured on it.

06/04/2007
Past version of MCOB 3.6.13 before 06/04/2007

MCOB 3.6.14

(1) Prominence of relevant information can play a key role in ensuring that a communication is clear, fair and not misleading. As a consequence, a number of requirements in MCOB relate to prominence. Where this is the case, the FSA will assess prominence in the context of the promotion as a whole. Use can be made of the positioning of text, background and text colour and typesize to ensure that prescribed information meets the requirements of MCOB. The surrounding of required statements with other information should be avoided where this might detract from the prominence which it is obligatory to afford to the statements.
(2) Firms may if they wish include a foreign language version of any required warning, in addition to the English language version required by these rules. If foreign language versions of warnings are included, firms are reminded of prominence requirements in MCOB 3.6.13 R and MCOB 3.6.14 G (1). Information should not be included which detracts from the required prominence of warning statements.

31/10/2004

Transient advertising

MCOB 3.6.15

MCOB 3.6.13 R (Required risk statements) does not apply if the non-real time financial promotion is communicated:

(1) by way of sound broadcasting or television where the primary purpose of the programming in which the promotion is contained is not to promote lending; or
(2) by an exhibition of pictures or photographic or cinematographic films.

06/04/2007
Past version of MCOB 3.6.15 before 06/04/2007

MCOB 3.6.16

(1) MCOB 3.6.15 R (1) is intended to distinguish between promotions in breaks between 'normal' commercial broadcast programming (where the text prescribed in MCOB 3.6.13 R (Required risk statements) is not required) and promotions in breaks which are in or around programming intended to promote lending where MCOB 3.6.13 R (Required risk statements) applies.
(2) In relation to promotions on dedicated interactive television services, if the promotion is not contained within programming but instead forms a separate feature, the exemption offered by MCOB 3.6.15 R (1) would not be available.

31/10/2004

Annual percentage rate (APR)

MCOB 3.6.17

(1) A firm must ensure that if a non-real time financial promotion contains either price information for specific qualifying credit, or makes reference (either explicitly or implicitly) to the availability of credit for customers who might otherwise consider their access to credit restricted, the promotion also:

(a) states the APR;
(b) gives the APR, and the accompanying statement in (3), with no less prominence than any price information or reference (either explicitly or implicitly) to the availability of credit for customers who might otherwise consider their access to credit restricted; and
(c) positions the APR after any other rate of charge relating to the qualifying credit, clearly distinguishing it from any such rate but without interjecting other information in between the APR and any other rate of charge.

(2) A firm must calculate the APR in accordance with MCOB 10 (Annual percentage rate).
(3) The APR must be expressed as follows, with X being the APR calculated for the particular qualifying credit: 'The overall cost for comparison is X% APR'

06/04/2007
Past version of MCOB 3.6.17 before 06/04/2007

MCOB 3.6.18

MCOB 3.6.17 R does not require a firm to explain the basis on which the APR is calculated, or to provide a figure for the total charge for credit, in the non-real time financial promotion.

06/04/2007
Past version of MCOB 3.6.18 before 06/04/2007

MCOB 3.6.19

For the purposes of MCOB 3.6.17 R(1), references to the availability of credit for customers who might otherwise consider their access restricted include references to:

(1) credit history; or
(2) credit rating; or
(3) county court judgments; or
(4) employment; or
(5) housing circumstances (for example, council tenants).

31/10/2004

MCOB 3.6.20

(1) In relation to MCOB 3.6.17 R(1)(c), the intention is that the APR should follow on, but be readily identifiable as different, from the indicated rate or rates of charge.
(2) For multi-rate products this should mean that the APR is presented, in sequence, after the different rates of charge that apply.
(3) The APR may be distinguished from other rates of charge by techniques such as using a contrasting (and legible) colour for text. However, the requirement of MCOB 3.6.17 R(1)(c) will not be satisfied by text devices such as the use of brackets which tend to diminish the impact of the APR.

31/10/2004

MCOB 3.6.21

If a financial promotion contains price information for more than one qualifying credit product, MCOB 3.6.17 R requires an APR to be provided for each product. Where more than one APR is required to be given, each APR will need to be no less prominent than:

(1) any price information relating to the particular product;
(2) any reference (either explicitly or implicitly) to the availability of credit for customers who might otherwise consider their access to credit restricted; and
(3) any other APR in the financial promotion.

06/04/2007
Past version of MCOB 3.6.21 before 06/04/2007

MCOB 3.6.22

If the non-real time financial promotion concerns a contract under which the APR varies (for example, depending upon the circumstances of the customer), the APR required by MCOB 3.6.17 R (Annual percentage rate (APR)) is that which is representative of the business expected to arise from the promotion.

06/04/2007
Past version of MCOB 3.6.22 before 06/04/2007

MCOB 3.6.23

For the purposes of MCOB 3.6.22 R, an APR is not representative of business unless it is an APR at or below which at least 66% of customers responding to the promotion and who enter into a qualifying credit agreement which is the subject of the promotion would be charged.

31/10/2004

MCOB 3.6.24

(1) The FSA would not regard an APR described as 'from X%' as satisfying MCOB 3.6.22 R.
(2) In MCOB 3.6.22 R, when determining the representative APR, account should be taken of the business that has arisen from similar qualifying credit promotion in the previous 12 months. Where the financial promotion is for a new product or business, reference should instead be had to the relevant business plans.

MCOB 3.6.25

If the non-real time financial promotion of qualifying credit concerns a contract where the APR varies depending upon the circumstances of the customer, the following further statement must be included with due prominence: 'The actual rate available will depend upon your circumstances. Ask for a personalised illustration.'

06/04/2007
Past version of MCOB 3.6.25 before 06/04/2007

Multi-rate mortgages

MCOB 3.6.26

If the non-real time financial promotion of qualifying credit is for a product where more than one rate of charge will or may apply during the course of the contract, and the non-real time financial promotion of qualifying credit contains information about any of these rates then:

(1) the non-real time financial promotion of qualifying credit must contain a clear and no less prominent description of all of the rates of charge that will apply;
(2) where any rate to be charged in the future is variable (such as the mortgage lender's standard variable rate), the rate indicated must be the level of that rate current at the time of the promotion; and
(3) the rates must be stated in sequence from the rate initially applying through to the rate assumed to apply at the end of the mortgage, and after each rate must be given a statement:

(a) of its period of application; and
(b) that the rate then changes.

06/04/2007
Past version of MCOB 3.6.26 before 06/04/2007

Fees for advice or arranging

MCOB 3.6.27

If a non-real time financial promotion of qualifying credit relates to the controlled activities of advising on or arranging qualifying credit and a fee may be charged for these activities, a firm must ensure that a prominent indication is given of:

(1) the amount of the fee (if known); or
(2) a representative fee based upon the business expected to arise from the promotion.

06/04/2007
Past version of MCOB 3.6.27 before 06/04/2007

MCOB 3.6.28

MCOB 3.6.27 R seeks to ensure that customers are given early notice of the existence of any fees charged by intermediaries in connection with the provision of qualifying credit. Where the fee is known at the outset, this must be indicated. The indication could be either as a cash value or as a percentage. If the charging of a fee, and the level of this, are dependent upon the circumstances of the customer, the indication must be based upon the business that is expected to result from the promotion.

31/10/2004

MCOB 3.6.29

MCOB 3.6.14 G(1) provides further guidance in relation to prominence.

31/10/2004

MCOB 3.6.30

MCOB 3.6.27 R(2) does not require the promotion to set out the characteristics of the representative business (loan amount etc) on which the indicated fee is based. For example, where the fee charged by a firm relates to circumstances of the customer such as their previous credit history, it would be sufficient to state that 'There will be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate that it will be X'.

31/10/2004

MCOB 3.7

Unsolicited real time financial promotions of qualifying credit, a home reversion plan or a regulated sale and rent back agreement

30/06/2010
Past version of MCOB 3.7 before 30/06/2010

Meaning of 'solicited' and 'unsolicited' real time financial promotion

MCOB 3.7.1

(1) An unsolicited real time financial promotion is a real time financial promotion which is not solicited as described in (2).
(2) A solicited real time financial promotion is a real time financial promotion which is solicited, that is, it is made in the course of a personal visit, telephone call or other interactive dialogue if that call, visit or dialogue:

(a) was initiated by the recipient of the financial promotion; or
(b) takes place in response to an express request from the recipient of the financial promotion;

and it is clear from all the circumstances when the call, visit or dialogue is initiated or requested that during the course of the visit, call or dialogue a financial promotion would be made.
(3) In (2), a person is not to be treated as expressly requesting a call, visit or dialogue:

(a) because he omits to indicate that he does not wish to receive any or any further visits or calls or to engage in any or any further dialogue;
(b) because he agrees to standard terms that state that such visits, calls or dialogues will take place unless he has signified clearly that, in addition to agreeing to the terms, he is willing for them to take place.

(4) If a financial promotion is solicited by a person ('R') it is treated as also having been solicited by any other person to whom it is made at the same time as R if that other person is a close relative of R or is expected to enter into a home reversion plan, a regulated sale and rent back agreement or any contract for qualifying credit jointly with R.

30/06/2010
Past version of MCOB 3.7.1 before 30/06/2010

MCOB 3.7.2

MCOB 3.7.1 R is based on article 8 of the Financial Promotion Order. Guidance on whether a real time financial promotion is solicited is contained in PERG 8.10.8G (Solicited v unsolicited real-time promotions). PERG 8.10.11G to PERG 8.10.14G also gives guidance on who will be considered the 'recipient' of a communication.

06/04/2007
Past version of MCOB 3.7.2 before 06/04/2007

Prohibition on unsolicited real time financial promotions to customers

MCOB 3.7.3

A firm must not make an unsolicited real time financial promotion of qualifying credit, a home reversion plan or a regulated sale and rent back agreement unless the customer has an established existing customer relationship with the firm and the relationship is such that the customer envisages receiving such financial promotions.

30/06/2010
Past version of MCOB 3.7.3 before 30/06/2010

MCOB 3.7.4

(1) Firms are reminded of the exemptions in MCOB 3.2.5 R (Application: what? exemptions). MCOB 3.7.3 R does not prohibit an exempt real time financial promotion.
(2) MCOB 3.2.5 R(2) creates an exemption for financial promotions that contain only very limited information about the firm (such as its name or contact details). The limited nature of this exemption means that a firm is unlikely to be able to use it to induce a customer to approach the firm and turn any subsequent communication by the firm into a solicited real time financial promotion.

06/04/2007
Past version of MCOB 3.7.4 before 06/04/2007

MCOB 3.8

Form and content of real time qualifying credit promotions

01/12/2004

MCOB 3.8.1

A firm should note that MCOB 3.7.3 R (Prohibition on unsolicited real time promotions to customers) prevents a firm from communicating to a customer an unsolicited real time financial promotion of qualifying credit other than an exempt promotion (which is outside the scope of this chapter) or where MCOB 3.7.3 R applies. Many solicited real time financial promotion will be exempt promotions (and, therefore, outside the scope of this chapter). Accordingly, MCOB 3.8.2 R and MCOB 3.8.3 G apply only to solicited real time financial promotions which are not exempt financial promotions and to unsolicited real time financial promotion of qualifying credit within MCOB 3.7.3 R.

06/04/2007
Past version of MCOB 3.8.1 before 06/04/2007

MCOB 3.8.2

A firm must ensure that an individual who makes a real time financial promotion of qualifying credit on the firm's behalf:

(1) does so in a way which is clear, fair and not misleading;
(2) does not make any untrue claims;
(3) makes clear the purpose (or purposes) of the financial promotion at the initial point of communication, and identifies himself and the firm which he represents;
(4) if the time and method of communication were not previously agreed by the recipient:

(a) checks that the recipient wishes him to proceed;
(b) terminates the communication if the recipient does not wish him to proceed (but may ask for another appointment);
(c) recognises and respects, promptly, the right of the recipient to:

(i) end the communication at any time;
(ii) refuse any request for another appointment;

(5) gives any person with whom he arranges an appointment a contact point;
(6) does not communicate with a person:

(a) at an unsocial hour, unless the person has previously agreed to such a communication;
(b) on an unlisted telephone number, unless the person has previously agreed to such calls on that number.

06/04/2007
Past version of MCOB 3.8.2 before 06/04/2007

MCOB 3.8.3

In MCOB 3.8.2 R(6)(a) an unsocial hour usually means on a Sunday or before 9am or after 9pm on any other day. It could also mean other days of the week or other times if the firm knows that a particular customer would not wish to be called on that day or at that time for reasons of, for example, religious faith or night shift working.

31/10/2004

MCOB 3.8.4

The requirements of MCOB 3.8.2 R and MCOB 3.8.3 G:

(1) apply in respect of all individuals who initiate the communication, including advisers and call centre operators;
(2) apply to all forms of real time financial promotion of qualifying credit with customers, including face-to-face and telephone financial promotion;
(3) but do not prevent, for example, a telephone call centre which has received a call from a customer at an hour generally regarded as unsocial, either responding to that call or asking during the call if the customer would like details of other qualifying credit

06/04/2007
Past version of MCOB 3.8.4 before 06/04/2007

MCOB 3.8.5

SYSC 3.2.20 R (Records) requires a firm to take reasonable care to make and retain certain records. For a telemarketing campaign to which MCOB 3.8.2 R and MCOB 3.8.3 G apply, those records should include copies of any scripts used.

31/10/2004

MCOB 3.8.6

Firms should note the additional disclosure requirements in MCOB 4.4.7 R (Disclosure where initial contact is by telephone) and MCOB 4.5 (Additional disclosure for distance mortgage mediation contracts and distance home purchase mediation contracts with retail customers) in relation to telephone calls that may fall within the definition of a financial promotion.

06/04/2007
Past version of MCOB 3.8.6 before 06/04/2007

MCOB 3.8A

Form and content of financial promotions of home reversion plans

06/04/2007

Clear, fair and not misleading

MCOB 3.8A.1

A firm which communicates or approves a financial promotion of a home reversion plan must take reasonable steps to ensure that the financial promotion is clear, fair and not misleading.

06/04/2007

MCOB 3.8A.2

The guidance on the clear, fair and not misleading standard at MCOB 3.6.5 G, MCOB 3.6.10 G and MCOB 3.6.14 G may be relevant.

06/10/2010
Past version of MCOB 3.8A.2 before 06/10/2010

Non-real time financial promotions to customers

MCOB 3.8A.3

A non-real time financial promotion of a home reversion plan must:

(1) describe any home reversion plan as a 'home reversion plan' and not use any other expression to describe it; and
(2) unless it is communicated by way of sound broadcasting or television where the primary purpose of the programming in which the promotion is contained is not to promote home finance or by an exhibition of pictures or photographic or cinematographic films:

(a) (if made to or directed at a customer other than an unauthorised reversion provider) prominently state that it relates to a home reversion plan and that the customer should ask for a personalised illustration to understand its features and risks; or
(b) (if made to or directed at an unauthorised reversion provider) prominently state that a home reversion plan is a long-term investment and a complex legal arrangement, and that expert independent legal advice should always be obtained before entering into any agreement.

06/04/2007

MCOB 3.8A.4

(1) A firm should take reasonable steps to ensure that, for a non-real time financial promotion:

(a) it includes any matters the omission of which causes the financial promotion not to be clear, fair and not misleading;
(b) if it describes a feature of any home reversion plan, it gives no less prominence to the possible disadvantages than to the benefits associated with that feature;
(c) it uses plain and intelligible language, and is easily legible (or, in the case of oral promotions, clearly audible);
(d) the accuracy of all statements of fact in it can be substantiated;
(e) its promotional purpose is not in any way disguised or misrepresented;
(f) any statement of fact, promise or prediction is clear, fair and not misleading and any relevant assumptions are clearly and prominently disclosed;
(g) any statement of opinion is honestly held and, unless consent is impracticable, given with the written consent of the person concerned;
(h) the facts on which any comparison or contrast is made are verified, or, alternatively, that relevant assumptions are prominently disclosed and that the comparison or contrast is presented in a fair and balanced way, which is not misleading and includes all factors which are relevant to the comparison or contrast;
(i) it does not contain any false indications, in particular as to:

(i) the firm's independence; or
(ii) the firm's resources and scale of activities;

(j) the design, content or format does not in any way disguise, obscure or diminish the significance of any statement, warning or other matter which the home reversion plan is required by this chapter to contain;
(k) it does not include any reference to approval by the FSA or any government body, unless such approval has been obtained in writing from the FSA or that body (see also GEN 1.2 (Referring to approval by the FSA));

(a) Contravention of (1) may be relied on as tending to show contravention of MCOB 3.8A.1 R.
(b) Compliance with (1) may be relied on as tending to show compliance with MCOB 3.8A.1 R.

06/04/2007

MCOB 3.8A.5

The effect of giving no less prominence to the possible disadvantages than to the benefits associated with a feature will depend upon the content of the promotion. The following non-exhaustive examples would satisfy the requirement:

(1) a promotion which, when describing any possible monetary saving, also clearly states how this could be achieved; and
(2) a promotion which, when including references to non-standard services or facilities, also clearly states that an additional fee may be payable for these.

06/04/2007

No approval of real time financial promotions of a home reversion plan

MCOB 3.8A.6

A firm must not approve a real time financial promotion of a home reversion plan.

06/04/2007

Referring to the FSA

MCOB 3.8A.7

The guidance on referring to the FSA in a financial promotion may be relevant (see MCOB 3.6.2 G (3)).

06/04/2007

MCOB 3.8B

Form and content of financial promotions of regulated sale and rent back agreements

30/06/2010

Clear, fair and not misleading

MCOB 3.8B.1

A firm which communicates or approves a financial promotion of a regulated sale and rent back agreement must take reasonable steps to ensure that the financial promotion is clear, fair and not misleading.

30/06/2010

MCOB 3.8B.2

The guidance on the clear, fair and not misleading standard at MCOB 3.6.5 G, MCOB 3.6.10 G and MCOB 3.6.14 G may be relevant.

06/10/2010
Past version of MCOB 3.8B.2 before 06/10/2010

Ban on SRB leaflet dropping

MCOB 3.8B.3

A regulated sale and rent back firm must not communicate an unsolicited non-real time financial promotion that relates to a regulated sale and rent back agreement to a potential SRB agreement seller in the form of a leaflet or brochure.

30/06/2010

Non-real time financial promotions to customers and advertisements

MCOB 3.8B.4

A non-real time financial promotion relating to a regulated sale and rent back agreement and any other advertisement which is issued by a regulated sale and rent back firm that could lead to the conclusion of a regulated sale and rent back agreement, must (unless it is of a kind listed in MCOB 3.2.5 R(2)) contain a risk warning that uses the following wording:

"If you enter into a sale and rent back agreement you are unlikely to get the market value of your home and, as a tenant, may only be able to remain there for a limited period. There may be other options available. Please ask for a key terms statement.".

30/06/2010

MCOB 3.8B.5

A non-real time financial promotion relating to a regulated sale and rent back agreement and any other advertisement which is issued by a regulated sale and rent back firm that could lead to the conclusion of a regulated sale and rent back agreement, must describe any regulated sale and rent back agreement as a "sale and rent back agreement" and not use any other expression such as "equity release" to describe it.

30/06/2010

MCOB 3.8B.6

(1) A firm should take reasonable steps to ensure that, for a non-real time financial promotion:

(a) it includes any matters the omission of which causes the financial promotion not to be clear, fair and not misleading;
(b) if it describes a feature of any regulated sale and rent back agreement, it gives no less prominence to the possible disadvantages than to the benefits associated with that feature;
(c) it uses plain and intelligible language, and is easily legible (or, in the case of oral promotions, clearly audible);
(d) the accuracy of all statements of fact in it can be substantiated;
(e) its promotional purpose is not in any way disguised or misrepresented;
(f) any statement of fact, promise or prediction is clear, fair and not misleading and any relevant assumptions are clearly and prominently disclosed;
(g) any statement of opinion is honestly held and, unless consent is impracticable, given with the written consent of the person concerned;
(h) the facts on which any comparison or contrast is made are verified, or, alternatively, that relevant assumptions are prominently disclosed and that the comparison or contrast is presented in a fair and balanced way, which is not misleading and includes all factors which are relevant to the comparison or contrast;
(i) it does not contain any false indications, in particular as to the firm's resources and scale of activities;
(j) the design, content or format does not in any way disguise, obscure or diminish the significance of any statement, warning or other matter which the regulated sale and rent back agreement is required by this chapter to contain; and
(k) it does not include any reference to approval by the FSA or any government body, unless that approval has been obtained in writing from the FSA or that body (see also GEN 1.2 (Referring to approval by the FSA)).

(a) Contravention of (1) may be relied on as tending to show contravention of MCOB 3.8B.1 R.
(b) Compliance with (1) may be relied on as tending to show compliance with MCOB 3.8B.1 R.

30/06/2010

MCOB 3.8B.7

The effect of giving no less prominence to the possible disadvantages than to the benefits associated with a feature will depend on the context of the promotion. The costs, restrictions or conditions relating to a feature such as any option available should be detailed for the following non-exhaustive examples:

(1) where any part of the discount on the market value of the property is to be repaid to the consumer after a qualifying period; and
(2) where a consumer is to benefit from shared appreciation in the value of the property.

30/06/2010

Exploitation of customer

MCOB 3.8B.8

A firm must not in any financial promotion of a regulated sale and rent back agreement exploit the vulnerable nature or circumstances of any customer who may be in financial difficulties and at risk of losing his or her home and must accordingly avoid using in the promotion phrases or terms such as "fast sales", "rescue" or "cash quickly" or any other similar expression.

30/06/2010

No approval of real time financial promotions of a regulated sale and rent back agreement

MCOB 3.8B.9

A firm must not approve a real time financial promotion of a regulated sale and rent back agreement.

30/06/2010

Referring to the FSA

MCOB 3.8B.10

The guidance on referring to the FSA in a financial promotion may be relevant (see MCOB 3.6.2 G (3)).

30/06/2010

MCOB 3.9

Confirmation of compliance: financial promotions of qualifying credit, home reversion plans or regulated sale and rent back agreements

30/06/2010
Past version of MCOB 3.9 before 30/06/2010

MCOB 3.9.1

(1) Before a firm communicates or approves a non-real time financial promotion of qualifying credit, a home reversion plan or a regulated sale and rent back agreement it must confirm that the financial promotion complies with the rules in this chapter.
(2) A firm must arrange for the confirmation exercise in (1) to be carried out by an individual or individuals with appropriate expertise.

30/06/2010
Past version of MCOB 3.9.1 before 30/06/2010

MCOB 3.9.2

(1) 'Appropriate expertise' will vary depending on the complexity of the financial promotion and the qualifying credit, home reversion plan or regulated sale and rent back agreement to which it relates. The individuals engaged by a firm to confirm the compliance of its financial promotions with this chapter may themselves have different levels of expertise and therefore a different level of authority for confirmation depending on the type of promotion and the qualifying credit, home reversion plan or regulated sale and rent back agreement involved.
(2) A firm may arrange for a third party with appropriate expertise to carry out the confirmation exercise on the firm's behalf, but the responsibility for the financial promotion remains with the firm.

30/06/2010
Past version of MCOB 3.9.2 before 30/06/2010

Withdrawing confirmation

MCOB 3.9.3

If, at any time after it has completed a confirmation exercise in MCOB 3.9.1 R(1), a firm becomes aware that a financial promotion no longer complies with the rules in this chapter, it must ensure that the financial promotion is withdrawn as soon as is reasonably practicable by:

(1) ceasing to communicate it;
(2) withdrawing its approval (if applicable); and
(3) notifying any person that the firm knows to be relying on its approval (if applicable) or confirmation (under MCOB 3.9.5 R).

06/04/2007
Past version of MCOB 3.9.3 before 06/04/2007

MCOB 3.9.4

(1) MCOB 3.9.3 R is of particular importance to a financial promotion, such as a product brochure, that a firm uses over a period of time. It has little application to a financial promotion which is of its nature ephemeral, for example a mobile phone text message. Further, a financial promotion which clearly speaks as at a particular date will not cease to comply with the rules in this chapter merely because the passage of time has rendered it out-of-date. This does not mean, however, that a financial promotion can include information (such as price information) which is likely to become outdated during the currency of the financial promotion without the firm having regard to the need for any financial promotion to be clear, fair and not misleading. See further MCOB 3.6.5 G (2).
(2) For compliance with MCOB 3.9.3 R, the FSA will expect a firm to monitor its relevant financial promotions as part of the firm's routine compliance monitoring procedures. A firm may find it helpful to designate a relevant financial promotion with a 'review date', a date at which the financial promotion should be checked once more against the rules in this chapter. If it is found no longer to meet these requirements it should be withdrawn as soon as is reasonably practicable.
(3) If at any time a firm becomes aware that customers may have been misled by a financial promotion it should consider whether customers who have responded to the financial promotion should be contacted with a view to explaining the position and offering any appropriate form of redress to those who have suffered financial loss.

06/04/2007
Past version of MCOB 3.9.4 before 06/04/2007

MCOB 3.9.5

A firm will not contravene any of the rules in this chapter in circumstances where it (firm 'A') communicates a non-real time financial promotion which has been produced by another person provided that:

(1) A takes reasonable care to establish that another firm (firm 'B') has already confirmed the compliance of the financial promotion in accordance with MCOB 3.9.1 R;
(2) A takes reasonable care to establish that A communicates the financial promotion only to recipients of the type for whom it was intended at the time B carried out the confirmation exercise; and
(3) so far as A is, or ought reasonably to be, aware:

(a) the financial promotion has not ceased to be clear, fair and not misleading since that time; and
(b) B has not withdrawn the financial promotion.

06/04/2007
Past version of MCOB 3.9.5 before 06/04/2007

MCOB 3.10

Records: non-real time financial promotions of qualifying credit, a home reversion plan or a regulated sale and rent back agreement

30/06/2010
Past version of MCOB 3.10 before 30/06/2010

Requirement to make and retain records

MCOB 3.10.1

A firm must make an adequate record of each non-real time financial promotion of qualifying credit, a home reversion plan or a regulated sale and rent back agreement which it has confirmed as complying with the rules in this chapter. The record must be retained for a year from the date at which the financial promotion was last communicated.

30/06/2010
Past version of MCOB 3.10.1 before 30/06/2010

Content of records

MCOB 3.10.2

In deciding what is an adequate record, a firm should consider including, or providing reference to, where appropriate, such matters as:

(1) the name of the individual or individuals who confirmed that the financial promotion complied with the rules in this chapter;
(2) the date of confirmation and (where appropriate) approval;
(3) details of the medium for which the financial promotion was authorised;
(4) the evidence supporting any material factual statement about qualifying credit, a home reversion plan or a regulated sale and rent back agreement in the financial promotion. For example, for any testimonial they use, advertisers should hold signed and dated proof, including a contact address. Unless they are genuine opinions taken from a published source, testimonials should only be used with the written permission of those giving them; and
(5) where the promotion contains a typical APR, evidence to show that the APR was representative of the business expected to arise from the promotion (see MCOB 3.6.22 R).

30/06/2010
Past version of MCOB 3.10.2 before 30/06/2010

MCOB 3.10.3

(1) A firm should also retain a copy of the financial promotion as finally published or, if this is not practicable, monitor the published version to verify that it is in substantially the same format as the version which the firm confirmed complied with the rules in this chapter.
(2) Records which should be retained include:

(a) any written financial promotion used by an adviser; and
(b) any written material which is used in an organised marketing campaign (including, for example, written mailshots whether sent by e-mail, post, facsimile or other media).

(3) If the financial promotion is not in written form, the record should represent the actual financial promotion as accurately as possible.

06/04/2007
Past version of MCOB 3.10.3 before 06/04/2007

Form of records

MCOB 3.10.4

MCOB 2.8 (Record keeping) applies to the form in which records required in accordance with this chapter must be kept.

31/10/2004

MCOB 3.11

Communication and approval of qualifying credit promotions for an overseas person or an unauthorised person

01/12/2004

Approval of qualifying credit promotions

MCOB 3.11.1

(1) Section 21(1) of the Act (Restrictions on financial promotion) prohibits an unauthorised person from communicating a financial promotion, in the course of business, unless an exemption applies or the financial promotion is approved by a firm.
(2) Most of the rules in this chapter apply when a firm approves a financial promotion of qualifying credit in the same way as when a firm communicates a financial promotion of qualifying credit itself. A firm therefore has a similar responsibility for a financial promotion of qualifying credit that it approves as for one that it communicates. For example, a firm which approves a non-real time financial promotion must:

(a) confirm that the financial promotion complies with the rules in this chapter; and
(b) be able to show that it has taken reasonable steps to ensure that the financial promotion is clear, fair and not misleading.

(3) A firm may also wish to approve a financial promotion of qualifying credit that it communicates itself. This would ensure that an unauthorised person who then also communicates it to another person will not contravene the restriction in section 21(1) of the Act (Restrictions on financial promotion).
(4) A firm which approves a promotion that is exempt under MCOB 3.2.5 R (Application: what?; exemptions) or MCOB 3.3.1 R (Application: where?) must still comply with certain rules in this chapter (see MCOB 3.2.4 R (Application: what? exemptions) and MCOB 3.3.3 R (Exceptions to territorial scope: rules without territorial limitation)).

06/04/2007
Past version of MCOB 3.11.1 before 06/04/2007

No approval of real time qualifying credit promotions

MCOB 3.11.2

A firm must not approve a real time financial promotion of qualifying credit.

06/04/2007
Past version of MCOB 3.11.2 before 06/04/2007

Approval of qualifying credit promotions when not all the rules apply

MCOB 3.11.3

If a firm approves a financial promotion of qualifying credit in circumstances in which one or more of the rules in this chapter are expressly disapplied, the approval must be given on terms that it is limited to those circumstances.

06/04/2007
Past version of MCOB 3.11.3 before 06/04/2007

MCOB 3.11.4

If an approval is limited in accordance with MCOB 3.11.3 R, and an unauthorised person communicates the financial promotion to persons not covered by the approval, the unauthorised person may commit an offence under section 21(1) of the Act (Restrictions on financial promotion). A firm giving a limited approval may wish to advise the unauthorised person accordingly.

06/04/2007
Past version of MCOB 3.11.4 before 06/04/2007

Non-real time qualifying credit promotions for overseas persons

MCOB 3.11.5

A firm must not communicate or approve a non-real time financial promotion which relates to qualifying credit provided by an overseas person, unless:

(1) the qualifying credit promotion makes clear which firm has approved or communicated it and, where relevant, explains;

(a) that the rules made under the Act for the protection of customers do not apply;
(b) the extent and level to which the compensation scheme will be available, or if the scheme will not be available, a statement to that effect; and
(c) if the communicator wishes, the protection or compensation available under another system of regulation; and

(2) the firm has no reason to doubt that the overseas person will deal with customers in the United Kingdom in an honest and reliable way.

MCOB 3.12

The Internet and other electronic media

01/12/2004

MCOB 3.12.1

This section contains guidance on the use of the Internet and other electronic media to communicate financial promotions. Firms are also referred to the guidance in MCOB 2.7 (Application to electronic media and distance communications).

06/04/2007
Past version of MCOB 3.12.1 before 06/04/2007

Approach and general guidance

MCOB 3.12.2

Any material, which meets the definition of a financial promotion of qualifying credit, a home reversion plan or a regulated sale and rent back agreement, including any video or moving image material incorporated in any website containing such a financial promotion, should comply with the rules in this chapter. See PERG 8 (The Internet) for further guidance on financial promotions on the Internet, including the treatment of hyperlinks and banners.

30/06/2010
Past version of MCOB 3.12.2 before 30/06/2010

MCOB 3.12.3

As indicated in MCOB 3.3 (Application: where?), for the purposes of the financial promotion rules there are two types of approach to financial promotion communicated via the Internet and other electronic media:

(1) real time financial promotions where the communication is in the form, for example, of a telephone conversation, or other form of interactive dialogue; and
(2) non-real time financial promotions where the customer may, for example, choose from reading a description of the qualifying credit, home reversion plan or regulated sale and rent back agreement, through to the completion of a contract in a similar way to browsing through a leaflet rack. The rules in this chapter relating to hard copy financial promotions such as advertisements in magazines or newspapers apply equally to such promotions. E-mails, material displayed on a website and sound and television broadcasts are non-real time financial promotions (see MCOB 3.5.5 R(2)).

30/06/2010
Past version of MCOB 3.12.3 before 30/06/2010

MCOB 3.12.4

(1) Before using the Internet, digital or any other form of interactive television or other electronic media to promote its services, a firm should refer to legislation such as the Data Protection Act 1998 and the Computer Misuse Act 1990, as well as to this chapter.
(2) In relation to financial promotions communicated by way of television, firms will want to have regard to Guidance Note 3 of the ITC Code of Advertising Standards and Practice on the use and appearance of superimposed text.
(3) When designing websites and other electronic media, firms should be aware of the difficulties that can arise when reproducing certain colours and printing certain types of text. These difficulties could cause problems with the presentation and retrieval of required information. Any financial promotion of qualifying credit, a home reversion plan or a regulated sale and rent back agreement communicated by the Internet, digital or other forms of interactive television is subject to the requirements on form and content in this chapter.

30/06/2010
Past version of MCOB 3.12.4 before 30/06/2010

Specific guidance

MCOB 3.12.5

The FSA website http://www.fsa.gov.uk contains a wide range of information including pages of specific relevance to customers. Firms may, if they wish, include a reference or hyperlink to the FSA's site; this will not, however, replace any requirements of the financial promotion rules.

06/04/2007
Past version of MCOB 3.12.5 before 06/04/2007

MCOB 3 Annex 1

Examples of qualifying credit promotions

01/12/2004

This annex consists only of one or more forms. Forms are to be found through the following address:

Examples of qualifying credit promotions - mcob3_annex1.pdf

Export chapter as

Legal Instruments that change this Chapter Financial Promotion of qualifying credit, home reversion plans and regulated sale and rent back agreements

MCOB 4

Advising and selling standards

MCOB 4.1

Application

01/12/2004

Who?

MCOB 4.1.1

This chapter applies to a firm in a category listed in column (1) of the table in MCOB 4.1.2 R in accordance with column (2) of that table.

31/10/2004

MCOB 4.1.2

This table belongs to MCOB 4.1.1 R

(1) Category of firm

(2) Applicable section

mortgage lender

MCOB 4.1 to MCOB 4.4, and MCOB 4.8 to MCOB 4.9

mortgage adviser

whole chapter except MCOB 4.10

mortgage arranger

whole chapter except MCOB 4.7 and MCOB 4.10

home purchase provider

MCOB 4.1, MCOB 4.2 and MCOB 4.10 (except MCOB 4.10.5 G to MCOB 4.10.7 G).

MCOB 4.3, MCOB 4.4 and MCOB 4.8 in accordance with MCOB 4.10

home purchase adviser

MCOB 4.1, MCOB 4.2, MCOB 4.5, MCOB 4.6 and MCOB 4.10. MCOB 4.3, MCOB 4.4, MCOB 4.7 and MCOB 4.8 in accordance with MCOB 4.10

home purchase arranger

As for a home purchase adviser except MCOB 4.10.5 G to MCOB 4.10.7 G and MCOB 4.7 do not apply

reversion provider

reversion adviser

reversion arranger

see MCOB 8for the application of this chapter

SRB adviser

MCOB 4.1, MCOB 4.2, MCOB 4.5, MCOB 4.6 and MCOB 4.11

SRB arranger

MCOB 4.1, MCOB 4.2, MCOB 4.5, MCOB 4.6 and MCOB 4.11

SRB agreement provider

MCOB 4.1, MCOB 4.2 and MCOB 4.11

30/06/2010
Past version of MCOB 4.1.2 before 30/06/2010

What?

MCOB 4.1.3

This chapter applies if a firm in the course of carrying on a home finance activity:

(1) makes, or anticipates making, a personal recommendation about; or
(2) gives, or anticipates giving, personalised information relating to;

the customer:

(3) entering into a home finance transaction; or
(4) varying the terms of a home finance transaction entered into by the customer.

06/04/2007
Past version of MCOB 4.1.3 before 06/04/2007

MCOB 4.1.4

(1) MCOB 4.4 (Initial disclosure requirements) applies only in relation to varying the terms of a regulated mortgage contract entered into by the customer in any of the following ways:

(a) adding or removing a party;
(b) taking out a further advance; or
(c) switching all or part of the regulated mortgage contract from one interest rate to another.

(2) Otherwise, this chapter, MCOB 4, applies in relation to any form of variation of a regulated mortgage contract.

31/10/2004

MCOB 4.1.5

In relation to an equity release transaction, this chapter is modified by MCOB 8 (Equity release: advising and selling standards).

06/04/2007
Past version of MCOB 4.1.5 before 06/04/2007

MCOB 4.1.6

MCOB 4.1.5 R means that this chapter, MCOB 4, deals with standard regulated mortgage contracts, home purchase plans and regulated sale and rent back agreements only and therefore firms should note that the scope of service rules in this chapter do not apply in respect of equity release transactions.

30/06/2010
Past version of MCOB 4.1.6 before 30/06/2010

MCOB 4.1.7

If a firm is an authorised professional firm, when the firm conducts non-mainstream regulated activities with a customer, the only initial disclosure requirements that apply are those relating to the Financial Ombudsman Service and the FSCS (see MCOB 1.2.10 R (3)).

06/04/2007
Past version of MCOB 4.1.7 before 06/04/2007

MCOB 4.1.8

The FSA would not view the removal of a party to the regulated mortgage contract following the death of that party (and where no other variation is proposed) as a variation for the purposes of MCOB 4.1.4 R(1).

31/10/2004

MCOB 4.2

Purpose

01/12/2004

MCOB 4.2.1

(1) This chapter amplifies Principle 6 (Customers' interests), Principle 7 (Communications with clients) and Principle 9 (Customers: relationships of trust).
(2) The purpose of this chapter is to ensure that:

(a) customers are adequately informed about the nature of the service which they may receive from a firm in relation to home finance transactions. In particular firms need to make clear to customers the scope of home finance transactions available from them; and
(b) where advice is given, it is suitable for the customer. The steps firms need to take to ensure that the customer receives suitable advice will vary depending on the demands and needs of the customer and the type of home finance transaction.

(3) This chapter also implements certain requirements of the Distance Marketing Directive in relation to distance mortgage mediation contracts and distance home purchase mediation contracts.

06/04/2007
Past version of MCOB 4.2.1 before 06/04/2007

MCOB 4.3

Scope of service provided

01/12/2004

Providing services within and beyond scope

MCOB 4.3.1

(1) Subject to (2), a firm must take reasonable steps to ensure that the scope of the service given to a customer, and the home finance transactions offered, is based on a selection from one of the following:

(a) the whole market; or
(b) a limited number of home finance providers; or
(c) a single home finance provider.

(2) A firm may change the scope of the service it gives to a particular customer by widening the scope, for example, from that in (1)(c) to that in (b) or (a) but it must take reasonable steps to ensure that before doing so:

(a) the customer is made aware of the proposed change by a communication in a durable medium; and
(b) the customer's attention is drawn to any change in the fees that the customer must pay to the firm for the firm's services.

06/04/2007
Past version of MCOB 4.3.1 before 06/04/2007

MCOB 4.3.2

A firm must take reasonable steps to ensure that the extent of the scope of the service which it holds itself out as offering to a customer reflects the extent of that scope in practice.

31/10/2004

MCOB 4.3.3

SYSC 3.2.6 R and SYSC 6.1.1 R (Compliance) requires a firm (including a common platform firm) to 'establish, implement and maintain effective systems and controls for compliance with applicable requirements and standards under the regulatory system'. In meeting this requirement in relation to MCOB 4.3.2 R, a firm which states that it provides a service based on a limited number of mortgage lenders (see MCOB 4.3.1 R (1)(b)) should have adequate systems and controls in place to monitor whether business is actually placed with those mortgage lenders.

01/01/2007
Past version of MCOB 4.3.3 before 01/01/2007

Whole of market

MCOB 4.3.4

(1) A firm which holds itself out as giving information or advice to customers on regulated mortgage contracts from the whole market must not give any such information or advice unless:

(a) it has considered a sufficiently large number of regulated mortgage contracts which are generally available from the market; and
(b) the consideration in (a) is based on criteria which reflect adequate knowledge of the regulated mortgage contracts generally available from the market as a whole.

(2) A firm in (1) must satisfy the obligation in MCOB 4.7.2 R by taking reasonable steps to ensure that a personal recommendation given to a customer is:

(a) in accordance with the consideration in (1); and
(b) the regulated mortgage contract which on the basis of that consideration is the most suitable to meet the customer's needs.

31/10/2004

MCOB 4.3.4A

In applying this chapter, there is:

(1) one market for regulated mortgage contracts that are not lifetime mortgages; and
(2) another market for home purchase plans.

06/04/2007

MCOB 4.3.5

If a firm holds itself out as giving information or advice to customers on regulated mortgage contracts generally available from the whole market, the firm may choose to offer its customers only a selection of those regulated mortgage contracts. The firm's selection of regulated mortgage contracts for this purpose will need to be sufficiently large to enable the firm to satisfy the suitability requirement in MCOB 4.3.4 R (Whole of market).

31/10/2004

MCOB 4.3.6

(1) When offering only a selection of regulated mortgage contracts as described in MCOB 4.3.5 G, a firm should ensure that its analysis of the market and of the available regulated mortgage contracts is kept adequately up to date. For example, a firm would need to update its selection of regulated mortgage contracts if it became aware that a regulated mortgage contract had become generally available offering an improved product feature, or a better interest rate, when compared with the regulated mortgage contracts currently in the firm's selection.
(2) One way in which a firm may wish to satisfy MCOB 4.3.4 R is by using a panel of mortgage lenders, which includes representative firms from the whole market. However, if a firm wishes to offer a whole of market service through the use of a panel, it must still assess the individual regulated mortgage contracts that are being offered by mortgage lenders in making its selection.

31/10/2004

Independence

MCOB 4.3.7

(1) When providing information or giving advice to a customer on home finance transactions, a firm must not hold itself out as acting independently unless it intends to:

(a) provide that service wholly or predominantly based on the whole market in the relevant type of home finance transaction; and
(b) enable the customer to pay a fee for the provision of that service.

(2) A firm which in accordance with (1) holds itself out as independent must ensure that the information or advice subsequently given to the customer concerned is information or advice on home finance transactions from the whole market in the relevant type of home finance transaction.

06/04/2007
Past version of MCOB 4.3.7 before 06/04/2007

MCOB 4.3.8

(1) MCOB 4.3.7 R stipulates what a firm must do if it is to hold itself out to any particular customer as acting independently. A firm which wishes to hold itself out generally as acting independently should ensure that doing so (for example through a trading name or advertising) is consistent with the kind of service which customers receive in relation to the relevant home finance transactions.
(2) A firm that sells both investments and home finance products can offer from the whole market (or the whole market for a type of home finance transaction) and therefore be 'independent' for one but offer only a limited range for the other. If this is the case, the firm should explain the different nature of the services in a way that meets the requirement for clear, fair and not misleading communications in MCOB 2.2.6 (Clear, fair and not misleading communications).

06/04/2007
Past version of MCOB 4.3.8 before 06/04/2007

MCOB 4.3.9

MCOB 4.3.7 R (1)(b) means that a firm wishing to hold itself out as independent will need to give a customer a purely fee-based option for paying its fees. However, the firm may in addition provide the customer with other payment options, such as a combination of fees and commission.

31/10/2004

Appointed representatives

MCOB 4.3.10

A firm may restrict the home finance transactions it authorises a particular appointed representative to sell. If it does so, the appointed representative must reflect this restricted scope in any initial disclosure document or combined initial disclosure document provided to the customer.

06/04/2007
Past version of MCOB 4.3.10 before 06/04/2007

MCOB 4.4

Initial disclosure requirements

01/12/2004

Disclosure where initial contact is not made by telephone

MCOB 4.4.1

(1) A firm must ensure that, on first making contact with a customer when it anticipates giving personalised information or advice on a regulated mortgage contract, it:

(a) establishes with the customer whether it will provide advice or information;
(b) establishes with the customer how much he will pay or, alternatively, the basis on which the firm will be remunerated, where appropriate; and
(c) provides the customer with either:

(i) an initial disclosure document; or
(ii) if the firm has reasonable grounds to be satisfied that the services which it is likely to provide to the customer will relate to a combination of different types of home finance transaction, or will relate to home finance transactions and one or more of non-investment insurance contracts or packaged products, a combined initial disclosure document;

in a durable medium.
(2) The requirement in (1)(c) does not apply where;

(a) an initial disclosure document has already been provided by the firm and that document is still likely to be accurate and appropriate for the customer; or
(b) an initial disclosure document has already been provided by the firm which first made contact with the customer in respect of the particular regulated mortgage contract, and the firm subsequently making contact with the customer:

(i) does not anticipate altering or replacing the service described in that document; or
(ii) is not making contact with a view to concluding a distance mortgage mediation contract; or

(3) A firm may choose not to include the initial disclosure information required by sections 6, 7 and 8 of the initial disclosure document, and sections 5, 7 and 8 of the combined initial disclosure document, if it provides the customer with the information required by those sections in some other durable medium before the customer makes an application for a regulated mortgage contract.
(4) A firm must not use a combined initial disclosure document in relation to a combination of:

(a) regulated mortgage contracts (other than lifetime mortgages) or home purchase plans; and
(b) equity release transactions.

01/11/2007
Past version of MCOB 4.4.1 before 01/11/2007

MCOB 4.4.2

MCOB 4.4.1 R (2)(b) means, for example, that a mortgage lender will provide the initial disclosure document in a direct sale but not where the sale involves a mortgage intermediary. If a number of different firms are involved in relation to the transaction, having regard to MCOB 2.5.4 R (2), those firms should take reasonable steps to establish that the customer has been provided with an initial disclosure document as required by MCOB 4.4.1 R.

31/10/2004

MCOB 4.4.3

(1) In many cases, MCOB 4.4.1 R (1) means that the initial disclosure document will be provided at the time of the first contact between the firm and the customer. However, there may be circumstances, for example in relation to a loan for a business purpose, where the possibility of the customer entering into, or varying the terms of, a regulated mortgage contract is only identified after preliminary discussions. Disclosure, in the context of MCOB 4, is only required once this possibility is identified.
(2) In the FSA's opinion, the requirements at MCOB 4.4.1 R and MCOB 4.4.7 R would not apply when a customer contacts a firm simply to arrange to receive personalised information or advice on a regulated mortgage contract at a later time, such as when a customer books an appointment. In such cases, initial disclosure should be made when the firm first makes contact with the customer with a view to actually giving the information or advice. However, firms should note the additional disclosure requirements in MCOB 4.5 (Additional disclosure for distance mortgage mediation contracts with retail customers), and, the need to ensure that the required information (to be provided with the initial disclosure document) is provided in good time (see MCOB 4.5.3 G (1)).

31/10/2004

MCOB 4.4.4

If a firm has provided a customer with an appropriate initial disclosure document but subsequently discovers that the customer wants different services from those originally anticipated and described in the document, the firm will need to establish the details of the new service to be provided to the customer and provide the customer with a new initial disclosure document in accordance with MCOB 4.4.1 R or MCOB 4.4.7 R.

31/10/2004

Uncertainty whether a mortgage is regulated

MCOB 4.4.5

(1) If at the point that initial disclosure must be made in accordance with MCOB 4.4.1 R or MCOB 4.4.7 R a firm is uncertain whether the contract will be a regulated mortgage contract, the firm must:

(a) provide the initial disclosure document; or
(b) seek to obtain from the customer information that will enable the firm to ascertain whether the contract will be a regulated mortgage contract.

(2) Where (1)(b) applies, the initial disclosure document must be provided unless, on the basis of the information provided by the customer, the firm has reasonable evidence that the contract is not a regulated mortgage contract.

31/10/2004

Information to be provided to customers on request

MCOB 4.4.6

(1) If a firm's scope of service is based on MCOB 4.3.1 R (1)(b) it must maintain, and keep up to date, in a durable medium and in a form which is appropriate for distribution to the customer, a list of the mortgage lenders whose regulated mortgage contracts it offers. This list must also confirm whether or not the firm provides services in relation to all of the regulated mortgage contracts generally available from each mortgage lender.
(2) The customer must be provided with a copy of the information described in (1) on request.
(3) A firm must take reasonable steps to ensure that its appointed representatives provide a copy of the record in (1) to a customer on request.

31/10/2004

Disclosure where initial contact is by telephone

MCOB 4.4.7

(1) If the initial contact of a kind in MCOB 4.4.1 R(1) is by telephone, then unless MCOB 4.4.1 R(2)(a) applies, the following information must be given before proceeding further:

(a) the name of the firm and (if the call is initiated by or on behalf of the firm) the commercial purpose of the call;
(b) the scope of the service provided by the firm (within the meaning of MCOB 4.3.1 R);
(c) if the scope of the service is based on MCOB 4.3.1 R(1)(b), that the customer can request a copy of the list of mortgage lenders whose regulated mortgage contracts it offers and confirmation of whether the firm provides services in relation to all of the regulated mortgage contracts generally available from each mortgage lender;
(d) whether or not the firm will provide the customer with advice on those regulated mortgage contracts within its scope; and
(e) that the information given under (a) to (d) will be confirmed in writing.

(2) Provided that the telephone call in (1) has not led the firm to conclude that the customer is ineligible for any of its regulated mortgage contracts, and that the customer has provided his contact details, the firm must send the customer a copy of an initial disclosure document or combined initial disclosure document and any other information required to be provided, in a durable medium within five business days of the telephone call (see also MCOB 4.5.2 R (2)(b) for the equivalent requirement in relation to distance mortgage mediation contracts).
(3) If the customer accepts the offer in (1)(c) of a list of the mortgage lenders whose regulated mortgage contracts the firm offers, that list must also be sent with the information required in (2).

06/04/2007
Past version of MCOB 4.4.7 before 06/04/2007

MCOB 4.4.8

Firms are reminded of the requirements in MCOB 3.8 (Form and content of real time qualifying credit promotions) in relation to telephone calls that may fall within the definition of a financial promotion and should also note the additional requirements that apply in relation to distance mortgage mediation contracts with retail customers in MCOB 4.5 (Additional disclosure for distance mortgage mediation contracts with retail customers).

31/10/2004

MCOB 4.5

Additional disclosure for distance mortgage mediation contracts, distance home purchase mediation contracts and distance regulated sale and rent back mediation contracts with retail customers

30/06/2010
Past version of MCOB 4.5 before 30/06/2010

MCOB 4.5.1

(1) There are certain additional disclosure requirements laid down by the Distance Marketing Directive that will have to be provided by a mortgage intermediary, a home purchase intermediary and a SRB intermediary to a consumer prior to the conclusion of a distance mortgage mediation contract, a distance home purchase mediation contract or a distance regulated sale and rent back mediation contract. The purpose of this section, MCOB 4.5, is to set out those additional requirements. MCOB 4.6 sets out the cancellation rights that apply in relation to such contracts.
(2) The FSA expects the requirements in MCOB 4.5 and MCOB 4.6 to be relevant only in a small minority of cases. Mediation at a distance (see MCOB 1.3.5 G and MCOB 1.3.6 G) is unlikely in the home finance market. MCOB 4.5 and MCOB 4.6 will only be relevant if a mortgage intermediary, a home purchase intermediary or a SRB intermediary enters into a distance contract in respect of its mortgage mediation activities, home purchase mediation activities or regulated sale and rent back mediation activities quite independent of any contractual arrangement with a consumer relating to a particular regulated mortgage contract, home purchase plan or regulated sale and rent back agreement. An example of a distance mortgage mediation contract would be a distance contract under which a mortgage intermediary agreed to review and provide advice on a consumer's mortgage needs from time to time.

30/06/2010
Past version of MCOB 4.5.1 before 30/06/2010

MCOB 4.5.2

If the initial contact of a kind in MCOB 4.4.1 R (1) is with a consumer with a view to concluding a distance mortgage mediation contract, a distance home purchase mediation contract or a distance regulated sale and rent back mediation contract, a firm must:

(1) in addition to initial disclosure information and any other required information, provide the consumer with the information in MCOB 4 Annex 3 in a durable medium in good time before the conclusion of the distance mortgage mediation contract, distance home purchase mediation contract or distance regulated sale and rent back mediation contract with that customer unless an exemption in (2), (3), (4) or (5) applies.
(2) Exemption: telephone sales

(a) This exemption applies if the service is being provided on the telephone and the customer wishes to enter into a contract with the firm. Provided the customer gives his explicit consent to receiving only limited information, the firm may proceed on the basis of at least the following information:

(i) the name of the person in contact with the customer and his link with the firm;
(ii) the total price to be paid by the customer to the firm for the services, including all related fees, charges and expenses, and all taxes paid through the firm or, where an exact price cannot be indicated, the basis for the calculation of the price, enabling the customer to verify it;
(iii) notice of the possibility that other taxes or costs may exist that are not paid through the firm or imposed by it;
(iv) the information about cancellation rights set out in MCOB 4 Annex 3(5); and
(v) that other information is available on request, and the nature of that information.

(aa) If the customer does not give his explicit consent to receiving limited information, and the parties wish to proceed by telephone, the firm must, prior to the conclusion of the contract, provide orally to the customer all of the information required by (1).
(b) Where (a) or (aa) applies, the firm must send the consumer without delay and, at the latest immediately after a contract is concluded, the information required by (1), in a durable medium.

(3) Exemption: certain other means of distance communication. This exemption applies if the contract is concluded at the consumer's request using a means of distance communication (other than telephone) which does not enable provision of the information referred to in MCOB 4 Annex 3 in a durable medium before the conclusion of the contract. In that case, the firm must provide the consumer with the information in a durable medium immediately after its conclusion.
(4) Exemption: successive operations or separate operations under an initial service agreement. This exemption applies if the firm has an initial service agreement with the consumer and the contract is in relation to a successive operation or a separate operation of the same nature under that agreement.
(5) Exemption: other successive or separate operations This exemption applies if:

(a) the firm has no initial service agreement with the consumer; and
(b) the firm has performed an operation with the consumer within the last year; and
(c) he contract is in relation to a successive operation or separate operation of the same nature.

30/06/2010
Past version of MCOB 4.5.2 before 30/06/2010

MCOB 4.5.3

(1) The information in MCOB 4 Annex 3 will be provided in 'good time' for the purposes of MCOB 4.5.2 R (1), if provided in sufficient time to enable the customer to consider properly the services on offer.
(2) An example of the circumstances in which MCOB 4.5.2 R (4) or (5) may apply is given in MCOB 4.4.4 G. If the initial disclosure document and accompanying information (including that in MCOB 4 Annex 3) was previously provided to a customer and continues to be appropriate, there is no need to provide the information again. If additional information is required, this may be provided by a supplementary document. However, if a service of a different nature is proposed, the firm is expected to provide fresh initial disclosure documentation and, in respect of distance mortgage mediation contracts, distance home purchase mediation contracts and distance regulated sale and rent back mediation contracts with a consumer, this will need to be accompanied by the information in MCOB 4 Annex 3.

30/06/2010
Past version of MCOB 4.5.3 before 30/06/2010

MCOB 4.6

Cancellation of distance mortgage mediation contracts, distance home purchase mediation contracts and distance regulated sale and rent back mediation contracts

30/06/2010
Past version of MCOB 4.6 before 30/06/2010

MCOB 4.6.1

A consumer has no right to cancel a home finance transaction concluded with a firm but may have a right to cancel a distance contract concluded with a mortgage intermediary, a home purchase intermediary or a SRB intermediary for the provision of his services. Whether a mortgage intermediary, a home purchase intermediary or a SRB intermediary concludes a distance mortgage mediation contract, a distance home purchase mediation contract or a distance regulated sale and rent back mediation contract with a consumer will depend on the circumstances. For example, an intermediary may not, in advising on or arranging a regulated mortgage contract, home purchase plan or regulated sale and rent back agreement, act contractually on behalf of, or for, the customer. In such circumstances, no distance mediation contract will arise for the firm's services, and therefore no right to cancel. If there is a contract between the customer and the firm, however, and therefore there is a right to cancel, the firm is required by MCOB 4.5.2 R(1) to provide the information in MCOB 4 Annex 3(5).

30/06/2010
Past version of MCOB 4.6.1 before 30/06/2010

MCOB 4.6.2

The information provided in accordance with MCOB 4 Annex 3(5) should be sufficiently clear, prominent and informative to enable the consumer to understand the right to cancel.

01/11/2007
Past version of MCOB 4.6.2 before 01/11/2007

MCOB 4.6.3

Where the notice of the right to cancel forms part of another document, or is one of a number of documents sent to the consumer at the same time, a firm should ensure that the presence of the notice of the right to cancel is drawn to the consumer's attention.

01/11/2007
Past version of MCOB 4.6.3 before 01/11/2007

Cancellation period

MCOB 4.6.4

(1) A consumer has a right to cancel a distance mortgage mediation contract, a distance home purchase mediation contract or a distance regulated sale and rent back mediation contract in accordance with this section.
(2) The right to cancel must be exercised within 14 days beginning on the later of:

(a) the day of the conclusion of the contract; or
(b) the day on which the consumer receives the contractual terms and conditions and other information required by MCOB 4.4 and MCOB 4.5.

30/06/2010
Past version of MCOB 4.6.4 before 30/06/2010

Exercising the right to cancel

MCOB 4.6.5

A consumer who has a right to cancel a distance mortgage mediation contract, a distance home purchase mediation contract or a distance regulated sale and rent back mediation contract may, without giving any reason, cancel the contract by serving notice on the firm, before the expiry of the cancellation period in MCOB 4.6.4 R either:

(1) by serving on, or otherwise sending by post, notice to the firm's last known address, addressed to the firm, its appointed representative or on any agent of the firm with authority to accept notice on the firm's behalf; or
(2) in accordance with any other practical instructions for exercising that right provided to the consumer in accordance with MCOB 4 Annex 3(5).

30/06/2010
Past version of MCOB 4.6.5 before 30/06/2010

MCOB 4.6.6

Where the notice of cancellation is in a durable medium and is served in accordance with MCOB 4.6.5 R, it must be treated as being served on the firm on the date it is despatched by the consumer.

01/11/2007
Past version of MCOB 4.6.6 before 01/11/2007

MCOB 4.6.7

In the event of any dispute, unless there is clear written evidence to the contrary, the firm should treat the date cited by the consumer as being the date when notice was given, posted or otherwise sent.

01/11/2007
Past version of MCOB 4.6.7 before 01/11/2007

Effects of cancellation

MCOB 4.6.8

By exercising a right to cancel under MCOB 4.6.4 R the consumer withdraws from the contract and the entire contract is terminated.

01/11/2007
Past version of MCOB 4.6.8 before 01/11/2007

MCOB 4.6.9

Regulation 11 (Automatic cancellation of an attached distance contract) of the Distance Marketing Regulations, has the effect that when notice of cancellation is given in relation to a contract, that notice also operates to cancel any attached contract, which is also a distance financial services contract. An example of such an attached contract might be a distance non-investment insurance contract.

31/10/2004

MCOB 4.6.10

When a consumer exercises a right to cancel under MCOB 4.6.4 R:

(1) the firm must:

(a) pay to the consumer without delay, and no later than 30 days after the date on which the firm received notice of cancellation from him, any sums which he has paid to or for the benefit of the firm in connection with the contract (including sums paid by the consumer to agents of the firm) except for the amount referred to in (b);
(b) subject to (c), the firm is permitted to require the consumer to pay for the services it has actually provided in connection with the contract; the amount payable, however, must be in accordance with the sums which the consumer agreed to pay and must not:

(i) exceed an amount which is in proportion to the extent of the service already provided to the consumer by the firm; and
(ii) be such that it could be construed as a penalty;

(i) where performance of the contract has commenced before expiry of the cancellation period, this was requested by the consumer; and
(ii) the firm can demonstrate that the consumer was provided with details of the amount which he may be required to pay if exercising his right to cancel in accordance with MCOB 4 Annex 3(5).

(2) The firm is entitled to receive without delay, and no later than 30 days after the date on which the consumer posted or otherwise sent notice of cancellation to the firm any property that became the consumer's under the contract and any sums payable to the firm under (1)(b).

01/11/2007
Past version of MCOB 4.6.10 before 01/11/2007

Record keeping

MCOB 4.6.11

Where notice of cancellation has been served on a firm (or its appointed representative or agent), the firm must make and retain a record (which includes a copy of any receipt of notice issued to the consumer and the consumer's original notice instructions) for three years from the date when the firm first became aware that notice of cancellation had been served.

01/11/2007
Past version of MCOB 4.6.11 before 01/11/2007

MCOB 4.7

Advised sales

01/12/2004

Suitability

MCOB 4.7.1

Principle 9 requires a firm to take reasonable care to ensure the suitability of its advice. In accordance with that principle, a firm should take reasonable steps to obtain from a customer all information likely to be relevant for the purposes of MCOB 4.7.

31/10/2004

MCOB 4.7.2

A firm must take reasonable steps to ensure that it does not make a personal recommendation to a customer to enter into a regulated mortgage contract, or to vary an existing regulated mortgage contract, unless the regulated mortgage contract is, or after the variation will be, suitable for that customer (see MCOB 4.3.4 R (2), MCOB 4.3.5 G and MCOB 4.3.6 G).

31/10/2004

MCOB 4.7.3

In MCOB 4.7, a reference to a recommendation to enter into a regulated mortgage contract is to be read as including a reference to a recommendation to vary an existing regulated mortgage contract if the context so requires.

31/10/2004

MCOB 4.7.4

For the purposes of MCOB 4.7.2 R:

(1) a regulated mortgage contract will be suitable if, having regard to the facts disclosed by the customer and other relevant facts about the customer of which the firm is or should reasonably be aware, the firm has reasonable grounds to conclude that:

(a) the customer can afford to enter into the regulated mortgage contract;
(b) the regulated mortgage contract is appropriate to the needs and circumstances of the customer; and
(c) the regulated mortgage contract is the most suitable of those that the firm has available to it within the scope of the service provided to the customer;

(2) no recommendation must be made if there is no regulated mortgage contract from within the scope of the service provided to the customer which is appropriate to his needs and circumstances; and
(3) if a firm is dealing with an existing customer in arrears and has concluded that there is no suitable regulated mortgage contract for the purposes of MCOB 4.7.2 R, the firm must nonetheless have regard to MCOB 13.3.2AR (1), MCOB 13.3.2AR (5) and MCOB 13.3.2AR (6) (see also MCOB 13.3.4AR (1)(a) and MCOB 13.3.4AR (1)(b)).

25/06/2010
Past version of MCOB 4.7.4 before 25/06/2010

MCOB 4.7.5

In relation to MCOB 4.7.4 R(1)(a), a firm must explain to the customer that the assessment of whether he can afford to enter into a regulated mortgage contract is based on:

(1) current interest rates, which might rise in the future; and
(2) the customer's current circumstances, which might change in the future.

31/10/2004

MCOB 4.7.6

In relation to MCOB 4.7.4 R(1)(a) and (b), where a firm makes a personal recommendation to a customer to enter into a regulated mortgage contract where a main purpose is to consolidate existing debts it must also take account of the following, where relevant, in assessing whether the regulated mortgage contract is suitable for the customer:

(1) the costs associated with increasing the period over which a debt is to be repaid;
(2) whether it is appropriate for the customer to secure a previously unsecured loan; and
(3) where the customer is known to have payment difficulties, whether it would be more appropriate for the customer to negotiate an arrangement with his creditors than to take out a regulated mortgage contract.

31/10/2004

MCOB 4.7.7

(1) In assessing whether a customer can afford to enter into a particular regulated mortgage contract, a firm should give due regard to the following:

(a) information that the customer provides about his income and expenditure, and any other resources that he has available;
(b) any likely change to the customer's income, expenditure or resources; and
(c) the costs that the customer will be required to meet once any discount period in relation to the regulated mortgage contract comes to an end (on the assumption that interest rates remain unchanged).

(2) Contravention of MCOB 4.7.7 E(1) may be relied upon as tending to show contravention of MCOB 4.7.4 R(1)(a).

31/10/2004

MCOB 4.7.8

A firm may generally rely on any information provided by the customer for the purposes of MCOB 4.7.4 R(1)(a) unless, taking a common-sense view of this information, it has reason to doubt it.

31/10/2004

MCOB 4.7.9

MCOB 4.7.4 R(3) explains that different considerations apply when making a personal recommendation to a customer in arrears. For example, the circumstances of the customer may mean that, viewed as a new transaction, a customer could not be recommended to enter into a regulated mortgage contract. In such cases, a firm will still be able to make a personal recommendation to that customer where this recommendation is, in the circumstances, a more suitable one than the customer's existing regulated mortgage contract.

31/10/2004

MCOB 4.7.10

In complying with MCOB 4.7.4 R a firm is not required to consider whether it would be preferable for the customer to:

(1) purchase a property by using his own resources, rather than by borrowing under a regulated mortgage contract;
(2) rent a property, rather than purchase one; or
(3) delay entering into a regulated mortgage contract until a later date (on the grounds that property prices would have fallen in the intervening period, or that the interest rate in relation to the regulated mortgage contract would be lower, or both).

31/10/2004

MCOB 4.7.11

(1) In assessing whether the regulated mortgage contract is appropriate to the needs and circumstances of the customer for the purposes of MCOB 4.7.4 R(1)(b), a firm should give due regard to the following:

(a) whether the customer's requirements meet the eligibility criteria for the regulated mortgage contract (for example, the amount that the customer wishes to borrow, or the loan-to-value ratio);
(b) whether the customer should have an interest-only mortgage, a repayment mortgage, or a combination of the two;
(c) whether the customer has a preference for a particular term;
(d) whether the customer has a preference or need for stability in the amount of required payments, especially having regard to the impact on the customer of significant interest rate changes in the future;
(e) whether the customer has a preference or need for payments to be reduced at the outset (for example, a loan with an initial discount rate period);
(f) whether the customer intends to make early repayments; and
(g) whether the customer has a preference or need for any other features of a regulated mortgage contract (for example, payment holidays).

(2) Compliance with (1) may be relied upon as tending to show compliance with MCOB 4.7.4 R(1)(b).

31/10/2004

MCOB 4.7.12

(1) MCOB 4.7.11 E(1)(b) does not require a firm to provide advice on investments. Whether such advice should be given will depend upon the individual needs and circumstances of the customer. Where considered relevant, MCOB 4 does not restrict the ability of an adviser to refer the customer to another source of investment advice (for example, where the adviser is not qualified to provide advice on investments).
(2) Where the scope of the advice provided is based on a selection of regulated mortgage contracts from a single or limited number of lenders, the assessment of suitability should not be limited to the types of regulated mortgage contracts which the firm offers. A firm cannot recommend the 'least worst' regulated mortgage contract where the firm does not have access to products appropriate to the customer's needs and circumstances. This means, for example, that a firm dealing solely in the sub-prime market should not recommend one of these regulated mortgage contracts if approached for advice by a customer with an unblemished credit record.

06/04/2007
Past version of MCOB 4.7.12 before 06/04/2007

MCOB 4.7.13

(1) A firm should, out of all the regulated mortgage contracts identified as being appropriate for that customer, recommend the one that is the least expensive for that customer taking into account those pricing elements identified by the customer as being most important to him.
(2) Compliance with (1) may be relied upon as tending to show compliance with MCOB 4.7.4 R(1)(c).

31/10/2004

MCOB 4.7.14

(1) With regard to MCOB 4.7.13 E(1) different customers are likely to identify different pricing elements as being of most importance. For example, it may be the overall cost, the cost over the first five years, or the absence of

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MCOB Mortgages and Home Finance: Conduct of Business sourcebook

Used in

Export part as

Application and purpose

Application and purpose

Application

Purpose

General application: who? what?

Firm types and the home finance activities

Business loans: application of MCOB

Business loans: additional requirements if tailored route is used

Home purchase plans

Authorised professional firms

Pre-contractual arrangements by a home finance provider

General application: where?

Location of the customer

Financial Promotion

Electronic commerce activities and communications

Distance contracts entered into from an establishment in another EEA State

Distance contracts with retail customers

Use of intermediaries

Application to appointed representatives

Application to mortgages in relation to the Consumer Credit Act 1974

Conduct of business standards: general

Application

Who?

This table belongs to MCOB 2.1.1 R

What?

Communications

Purpose

General

Prescribed terms for regulated mortgage contracts, home reversion plans and regulated sale and rent back agreements

Related investment advice

Clear, fair and not misleading communications and financial promotions

Inducements: regulated mortgage contracts, home reversion plans and regulated sale and rent back agreements

Purpose

Prohibition of inducements

Quantification of inducements

High pressure sales: regulated mortgage contracts, home reversion plans and regulated sale and rent back agreements

Purpose

Fair treatment

Information

Reliance on others

Purpose

When firms can rely on others

Exclusion of liability

Purpose

Limits on the exclusion of liability

Protecting customer's interests: home purchase plans, home reversion plans and regulated sale and rent back agreements

Protecting customers' interests: additional material for home reversion plans

Protecting customer's interests: regulated sale and rent back agreements

Protecting customers' interests under regulated sale and rent back agreements: security of tenure

Protecting customers' interests: additional material for home purchase plans

Treating customers fairly: home purchase plans, home reversion plans and regulated sale and rent back agreements

Treating customers fairly: home reversion plans and regulated sale and rent back agreements

Independent valuation: home reversion plans and regulated sale and rent back agreements

Obtaining best price: partial home reversion plans or regulated sale and rent back agreements

Arranging or administering for unauthorised providers: home reversion plans

Arranging or administering for unauthorised providers: regulated sale and rent back agreements

Arranging or administering for unauthorised providers: home reversion plans and regulated sale and rent back agreements

Application to electronic media and distance communications

Additional guidance in respect of electronic communication with or for customers

General provisions related to distance contracts

Unsolicited services

E-Commerce

Application

Information about the firm and its products or services

Requirements relating to the placing and receipt of orders

Exception: contract concluded by e-mail

Record keeping

Purpose

Accessibility of records

Home purchase plans

Form of joint instruction letter

Financial Promotion of qualifying credit, home reversion plans and regulated sale and rent back agreements

Application: who?

Authorised professional firms

Nationals of other EEA States

Illustrative examples of qualifying credit promotions