Advice Unit: signposts to existing rules and guidance

The following information signposts to some of our existing rules, guidance and other information (such as occasional papers). It is based on questions firms have raised with the Advice Unit.

This may be useful to firms giving financial advice or providing discretionary investment management services, including those in the investments, pensions, protection, general insurance, mortgages and debt (debt-counselling) sectors.  

This information does not constitute formal guidance and does not have the status of guidance in the FCA Handbook.

Businesses will need to consider the specific obligations that apply to their specific circumstances, and may need to seek their own advice.

This information is not exhaustive. The information below is updated periodically, but will not necessarily reflect the latest position.

Question

Answer

Link

Designated investments1

Am I providing regulated advice?

See Article 53(1) to (1D) of the Regulated Activities Order as amended – 'advising on investments'

See PERG 8.24 to 8.29 – advising on a 'security' or 'relevant investment'

NB: on 3 January 2018, the requirements for 'advising on investments' changed following an amendment to Article 53 of the Regulated Activities Order. The amendment means that most regulated firms are now exempt from the need to hold a permission to 'advise on investments' under Article 53(1) unless the firm is providing a personal recommendation, see further information on the FCA's website, 'Changes to the Regulated Activities Order'

See also Article 53E of the Regulated Activities Order as amended – 'advising on conversion or transfer of pension benefits'

See PERG 2.7.16G, PERG 7.3.1EG, PERG 7.3.2G and PERG 12.6 – 'advising on conversion or transfer of pension benefits'

Glossary - 'designated investment'

Article 53(1) to 1(D) of the Regulated Activities Order as amended - 'advising on investments'

Glossary – ‘advising on investments’

PERG 8.24

PERG 8.25

PERG 8.26

PERG 8.27

PERG 8.28

PERG 8.29

Changes to the Regulated Activities Order

Article 53E of the Regulated Activities Order – 'advising on conversion or transfer of pension benefits'

PERG 2.7.16G

PERG 7.3

PERG 12.6

When does generic advice become regulated advice?

See PERG 8.26 – generic advice

See PERG 8 Annex 1 – Examples of what is and is not a personal recommendation and advice

'Generic advice' means advice or information that does not relate to a particular investment or does not otherwise meet one of the characteristics of regulated advice

See recitals 15 and 16 of the MiFID Org Regulation

PERG 8.26

PERG 8 Annex 1

Recitals 15 and 16 of MiFID Org Regulation

Am I providing a personal recommendation?

See Glossary – 'personal recommendation'

See PERG 8.30B - Personal recommendations

In summary, a 'personal recommendation' is a recommendation that is 'advice on investments' or ' advice on conversion or transfer of pension benefits' which is presented as suitable for the person to whom it is made, or is based on a consideration of the circumstances of that person

See the Glossary for definitions of:

– 'advising on investments' (see Article 53 (1) to (1D) of the Regulated Activities Order as amended)

– 'advising on conversion or transfer of pension benefits' (see also Article 53E of the Regulated Activities Order)

A recommendation is not a personal recommendation if it is issued exclusively to the public

See PERG 13.3 at Q.19 – 'what is a 'personal recommendation' for the purposes of MiFID?'

See PERG 8 Annex 1 – Examples of what is and is not a personal recommendation and advice

This provides guidance on what may constitute personal recommendations, including example scenarios to help firms understand when they may be giving a personal recommendation

Glossary - 'personal recommendation'

Glossary - 'advising on investments'

Glossary - 'advising on conversion or transfer of pension benefits'

Article 53E of the Regulated Activities Order - 'advising on conversion or transfer of pension benefits'

PERG 8.30B

PERG 8 Annex 1

PERG 13.3

When might I implicitly be providing a personal recommendation?

See PERG 8.30B.8G and PERG 8.30B.9G

This provides guidance on 'implicit' personal recommendations

For firms doing MiFID business, see CESR Q&A 'Understanding the definition of advice under MiFID' at paragraphs 45 to 47 – this provides guidance and illustrations on financial instruments being implicitly presented as suitable

PERG 8.30B

CESR Q&A - Understanding the definition of advice under MiFID

Where can I find rules/guidance on suitability of advice in the area of investments (including pensions)?

See COBS 9 – suitability (non-MiFID provisions)

See COBS 9A – suitability (MiFID provisions)

Firms that make personal recommendations on designated investments must comply with the suitability rules in COBS 9 or COBS 9A

See COBS 19.1 – advice or personal recommendations about a 'pension transfer', a 'pension conversion' or a 'pension opt-out'

Firms that make personal recommendations on pension transfers, pension conversions or pension opt-outs must comply with the rules in COBS 19.1

See ESMA Guidelines on certain aspects of MiFID suitability requirements

See FG 11/5 'Assessing suitability: Establishing the risk a customer is willing and able to take and making a suitable investment'

See TR 14/10 'Developments in the distribution of retail investments: Purchasing investments without a personal recommendation or with simplified advice'

See FG 17/82 ‘Streamlined advice and related consolidated guidance'

Glossary - 'designated investment'

COBS 9

COBS 9A

COBS 19.1

ESMA Guidelines - Guidelines on certain aspects of the MiFID suitability requirements

FG 11/5

TR 14/10

Article 25(2) of MiFID

Article 54 of MiFID Org Regulation

FG 17/8

Where can I find rules and guidance on customer fact-finding?

See COBS 9.2 – assessing suitability (Non-MiFID provisions)

See COBS 9A.2 – assessing suitability (MiFID provisions)

See ESMA Guidelines on certain aspects of MiFID suitability requirements

See the guidance in paragraphs 2.32 to 2.54 and Chapter 3 of FG 17/8 on the fact find process

COBS 9.2

COBS 9A.2

ESMA Guidelines - Guidelines on certain aspects of the MiFID suitability requirements

FG17/8 paragraphs 2.32 to 2.54

FG17/8 chapter 3

Article 25(2) of MiFID

Article 54 of MiFID Org Regulation

Article 55 of MiFID Org Regulation

Where can I find rules and guidance on the risk a customer is willing and able to take?

See COBS 9.2 – assessing suitability (Non-MiFID provisions)

See COBS 9A.2 – assessing suitability (MiFID provisions)

See ESMA Guidelines on certain aspects of MiFID suitability requirements

See FG 11/5 at Part 3, which includes guidance on the use of risk-profiling tools at paragraphs 3.9 to 3.13 and gives examples of good and poor practice in carrying out customer risk assessments

See the guidance in paragraphs 2.51 to 2.53 of FG 17/8 on some key issues in risk profiling

COBS 9.2

COBS 9A.2

ESMA Guidelines - Guidelines on certain aspects of the MiFID suitability requirements

FG 11/5

FG 17/8

Article 25(2) of MiFID

Article 54 of MiFID Org Regulation

Article 55 of MiFID Org Regulation

Where can I find rules and guidance on suitability reports?

See COBS 9.4 – providing suitability reports (non- MiFID provisions)

See COBS 9A.3 – information to be provided to the client (MiFID provisions)

See COBS 9.4.4R, COBS 9.4.5R and COBS 9.4.6R (Non-MiFID provisions) and COBS 9A.3.2R (MiFID provisions) for the timing rules governing the provision of suitability reports

See case study No.5 in Chapter 5 of FG17/8

COBS 9.4

COBS 9A.3

Article 25(6) of MiFID

Article 54(12) of MiFID Org Regulation

FG 17/8

Where can I find rules and guidance on key features documents?

See COBS 14.2 – providing product information to clients, including key features documents and key information documents

See COBS 14.3 (Non-MiFID provisions) and COBS 14.3A (MiFID provisions) – providing information about designated investments to clients, including providing a description of the nature and risks of designated investments to clients set out at COBS 14.3.2R and COBS 14.3A.3R

NB: from 1 January 2018, the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation applies to require provision of key information documents (KIDs) when PRIIPs are advised on or sold – see the PRIIPs disclosure section on our website and Article 13 of the PRIIPs Regulation

See case study No.6 in Chapter 5 of FG17/8

COBS 14.2

COBS 14.3

COBS 14.3A

Glossary - 'designated investment'

PRIIPs disclosure: Key Information Documents

PRIIPs Regulation

Article 24(4) of MiFID

Article 48 of MiFID Org Regulation

FG 17/8

What is focused advice? What is simplified advice? What is streamlined advice?

See paragraphs 2.1 – 2.6 of FG 17/8

FG 17/8

Where can I find examples of specific customer needs that could be dealt with through a streamlined advice service?

See FG 17/8 at paragraph 2.54 for examples of specific needs of customers that could be dealt with through a streamlined advice service

FG 17/8

Where can I find information on considering a client's existing investments when giving streamlined advice?

See COBS 9.2 – assessing suitability (Non-MiFID provisions)

See COBS 9A.2 – assessing suitability (MiFID provisions)

See the guidance in paragraphs 2.46 to 2.48 of FG 17/8

This provides guidance on our expectations where a client seeking streamlined advice does not provide information on their existing investments and specifically requests these investments not be considered as part of the advice process

See the guidance in paragraph 2.54 of FG 17/8

This provides examples of information required for particular streamlined advice scenarios

COBS 9.2

COBS 9A.2

FG 17/8

Article 25(2) of MiFID

Article 55 of MiFID Org Regulation

Where can I find information on considering information that I already hold about a customer when giving streamlined advice?

See COBS 9.2 – assessing suitability (Non-MiFID provisions)

See COBS 9A.2 – assessing suitability (MiFID provisions)

See the guidance in paragraphs 2.43 to 2.45 of FG 17/8

This provides guidance on the extent to which a firm is required to use information that it already holds about a client

COBS 9.2

COBS 9A.2

FG 17/8

Article 25(2) of MiFID

Article 55 of MiFID Org Regulation

Where can I find information on target markets?

See 3.3 of Product Intervention and Product Governance Sourcebook (PROD)

See 1.17(1) of the Responsibilities of Product Providers and Distributors for the Fair Treatment of customers (RPPD)

See pages 6 and 7 of TR 14/10

This provides useful information for firms distributing retail investments and discusses good/poor practice in relation to firms' practices around target market identification

See the guidance in paragraphs 2.7 to 2.16 of FG 17/8 on identifying the target market for the product offering and / or streamlined advice service

See the guidance in paragraphs 2.17 to 2.22 of FG 17/8 on filtering processes that firms could use to ensure that products are distributed in accordance with the needs of the intended clients for the service

See the guidance in paragraphs 2.24 to 2.25 of FG 17/8 on designing client interfaces for sales that are made through a streamlined advice service

PROD

The Responsibilities of Providers and Distributors for the Fair Treatment of Customers (RPPD)

TR 14/10

FG 17/8

Article 16 of MiFID

Article 9 of the MiFID Delegated Directive

Article 10 of the MiFID Delegated Directive

What professional standards apply to individuals involved in designing and signing off automated advice processes?

See the guidance in paragraphs 2.24 to 2.28 of FG 17/8

This provides guidance on the design of the client interface and the extent to which non-qualified individuals can support clients through system-delivered personal recommendations

See the guidance in paragraphs 4.14 to 4.21 of FG 17/8

This provides guidance on the required professional standards for staff involved in simplified automated advice processes

See ESMA Guidelines on certain aspects of MiFID suitability requirements: General Guideline 11 and supporting guidelines provide information relating to the skills, knowledge and expertise necessary for staff involved in suitability assessment processes

See SYSC 5.1, TC2 and TC3 – general requirements regarding staff skills, knowledge and expertise, competence and record keeping

FG 17/8

EMSA Guidelines on certain aspects of MiFID suitability requirements

SYSC 5.1

TC2

TC3

Where can I find rules on adviser charging?

See COBS 6.1A – rules on adviser charging

See guidance in paragraphs 4.1 to 4.9 of FG 17/8 on the adviser charging and remuneration rules in COBS 6.1A

COBS 6.1A

FG 17/8

Where can I find information to help me understand whether I am providing advice or a discretionary investment management service?

See the examples table at PERG 8.29.7G

PERG 8.29.7G

Where can I find rules and guidance on assessing suitability in the area of managing investments?

See Glossary – 'managing investments'

See COBS 9 – suitability (Non-MiFID provisions)

See COBS 9A – suitability (MiFID provisions)

See ESMA Guidelines on certain aspects of MiFID suitability requirements

See FG 11/5 'Assessing suitability: Establishing the risk a customer is willing and able to take and making a suitable investment'

See Annex 2 of TR 15/12 for examples of good and poor practice in the area of delivering suitable outcomes to investment portfolio customers

See guidance in paragraphs 4.31 to 4.45 of FG 17/8

This provides guidance on the suitability requirements applicable to firms offering discretionary investment management services (including model investment portfolios)

Glossary - 'managing investments'

COBS 9

COBS 9A

ESMA Guidelines - Guidelines on certain aspects of the MiFID suitability requirements

FG 11/5

TR 15/12

FG 17/8

Do firms managing investments need to comply with the rules on providing suitability reports in COBS 9.4?

See COBS 9.4 – providing suitability reports (Non-MiFID provisions)

See COBS 9A.3 – information to be provided to the client (MiFID provisions)

The rules on providing suitability reports only apply if a firm provides a personal recommendation to a retail client

NB: from 3 January 2018, the provisions of MiFID II apply and there are specific obligations on the provision of statements on how the client’s investments meet the preferences, objectives and other characteristics of the client when a firm provides a portfolio management service – see Article 25(6), Article 54(12) and recital 82 of MiFID

COBS 9.4

COBS 9A.3

Article 25(6) of MiFID

Article 54(12) of MiFID

Recital 82 of MiFID

Do the adviser charging rules apply to firms managing investments?

See COBS 6.1A – rules on adviser charging

The rules on adviser charging only apply to a firm which makes personal recommendations to retail clients in relation to retail investment products or P2P agreements

COBS 6.1A

What should I consider from a behavioural economics perspective when developing an automated advice model?

Principle 6 of the Principles for Businesses – Customers' interests

See COBS 2.1.1R – the client's best interests rule

See FG 11/05 'Assessing suitability: Establishing the risk a customer is willing and able to take and making a suitable investment selection'

This considers the role played by risk-profiling and asset-allocation tools, as well as the providers of these tools

See Occasional Paper No.1 'Applying behavioural economics at the Financial Conduct Authority (April 2013)' particularly Section 6 on identifying and prioritising risks to consumers

See Occasional Paper No.3 'How does selling insurance as an add-on affect consumer decisions? A practical application of behavioural experiments in financial regulation (March 2014)'

See Occasional Paper No.8 'Consumer Vulnerability (February 2015)' particularly Appendix 4 Practitioners' Pack

See Approach to Consumers particularly Chapter 3 on Key Principles

Principle 6 of the Principles for Businesses

COBS 2.1.1R

FG 11/5

Occasional Paper No.1

Occasional Paper No.3

Occasional Paper No.8

Approach to Consumers

Pure protection

Am I providing regulated advice?

See Article 53(1) of the Regulated Activities Order as amended – 'advising on investments'

See PERG 5.8 – advising on 'contracts of insurance'

See PERG 8.24 to 8.29 – advising on a 'security' or 'relevant investment'

See our webpage on 'Changes to the Regulated Activities Order'

NB: on 3 January 2018, the requirements for 'advising on investments' changed following an amendment to Article 53 of the Regulated Activities Order. The amendment means that most regulated firms are now exempt from the need to hold a permission to 'advise on investments' under Article 53(1) unless the firm is providing a personal recommendation

Glossary - 'pure protection contract'

Article 53(1) of the Regulated Activities Order as amended - 'advising on investments'

PERG 5.8

PERG 8.24

PERG 8.25

PERG 8.26

PERG 8.27

PERG 8.28

PERG 8.29

Changes to the Regulated Activities Order

Where can I find rules/guidance on suitability of advice in the area of pure protection?

Paragraph 3 of ICOBS 1 Annex 1 Application Part 2 – in relation to pure protection contracts, firms may elect to comply with COBS instead of ICOBS

ICOBS 5.2 – statement of demands and needs

ICOBS 5.3 – advised sales

COBS 9 – suitability

Paragraph 3 of ICOBS 1 Annex 1 Application Part 2

ICOBS 5.2

ICOBS 5.3

COBS 9

Regulated mortgages contracts

Am I providing regulated advice?

See Article 53A of the Regulated Activities Order as amended – 'advising on regulated mortgage contracts'

See PERG 2.7.16BG and PERG 4.6 - advising on 'regulated mortgage contracts'

Article 53A of the Regulated Activities Order as amended - 'advising on regulated mortgage contracts'

PERG 2.7.16BG

PERG 4.6

Am I providing a personal recommendation?

See Glossary – 'personal recommendation'

A 'personal recommendation' includes ' advice on a home finance transaction ' (and therefore advising on a 'regulated mortgage contract'), which is presented as suitable for the person to whom it is made, or is based on a consideration of the circumstances of that person

A recommendation is not a personal recommendation if it is issued exclusively through distribution channels or to the public

Glossary - 'personal recommendation'

Where can I find rules/guidance on advising in the area of mortgages?

See MCOB 4.7A – advised sales

Firms advising on regulated mortgage contracts must comply with the suitability rules in MCOB 4.7A, in particular MCOB 4.7A.2R

MCOB 4.8A – execution-only sales

Firms may only enter into, vary or arrange regulated mortgage contracts without advice in limited circumstances, see MCOB 4.8A

MCOB 4A – additional disclosure by MCD mortgage credit intermediaries

Firms advising on MCD regulated mortgage contracts must comply with MCOB 4A

MCOB 4.7A

MCOB 4.8A

MCOB 4A

General insurance

Am I providing regulated advice?

See Article 53(1) of the Regulated Activities Order as amended – 'advising on investments'

See PERG 5.8 - advising on 'contracts of insurance'

See PERG 8.24 to 8.29 – advising on a 'security' or 'relevant investment'

See our webpage on 'Changes to the Regulated Activities Order'

Glossary - 'general insurance contracts'

Article 53(1) of the Regulated Activities Order (link is external) as amended - 'advising on investments'

PERG 5.8

PERG 8.24

PERG 8.25

PERG 8.26

PERG 8.27

PERG 8.28

PERG 8.29

Changes to the Regulated Activities Order

Where can I find rules/guidance on advising in the area of general insurance?

ICOBS 4.1 - disclosure

Insurance intermediary firms must comply with the disclosure rules in ICOBS 4.1

ICOBS 5.1 – eligibility to claim benefits

Firms will find guidance and rules on customers' eligibility to claim benefits under insurance contracts at ICOBS 5.1

ICOBS 5.2 – statement of demands and needs

Insurance intermediary firms must comply with the rules on statements of demands and needs in ICOBS 5.2

ICOBS 5.3 – advised sales

Firms advising on the suitability of insurance contracts must comply with the suitability rules in ICOBS 5.3

NB: from 1 October 2018, the Insurance Distribution Directive applies – see PS 18/1

ICOBS 4.1

ICOBS 5.1

ICOBS 5.2

ICOBS 5.3

PS 18/1

Debt-counselling

Am I providing debt-counselling?

See Article 39E of the Regulated Activities Order (as amended) – 'debt counselling'

See PERG 17.1 to 17.7 – debt counselling Q&A

See Article 39E of the Regulated Activities Order – 'Debt counselling'

PERG 17.1

PERG 17.2

PERG 17.3

PERG 17.4

PERG 17.5

PERG 17.6

PERG 17.7

Where can I find rules/guidance on advising in the area of debt-counselling?

CONC 8 – debt advice

Firms that provide debt advice must comply with the requirements in CONC 8.3

CONC 8

  1. Including pensions but excluding pure protection contracts and P2P agreements.
  2. FG 17/8 sets out guidance in response to a number of Financial Advice Market Review (FAMR) recommendations, namely, streamlined advice, fact find process, non-advised services, together with guidance brought forward from FG 12/10: Simplified Advice guidance and FG 15/1: Retail Investment Advice guidance.