SRA Handbook

Appendix

Version 19 of the Handbook was published on 1 October 2017. For more information, please click "History" above.

Part 2: APPENDIX

APPENDIX 1: Insurance Mediation Activities

1

Disclosure of information

(a)

Where a firm undertakes insurance mediation activities for a client, it must take reasonable steps to communicate information to the client in a way that is clear, fair and not misleading.

(b)

Where a firm recommends a contract of insurance (other than a life policy) to a client, the firm must inform the client whether the firm has given advice on the basis of a fair analysis of a sufficiently large number of insurance contracts available on the market to enable the firm to make a recommendation in accordance with professional criteria regarding which contract of insurance would be adequate to meet the client's needs.

(c)

If the firm does not conduct a fair analysis of the market, the firm must:

(i)

advise the client whether the firm is contractually obliged to conduct insurance mediation activities in this way;

(ii)

advise the client that the client can request details of the insurance undertakings with which the firm conducts business; and

(iii)

provide the client with such details on request.

(d)

The information referred to in paragraphs 1(2) and 1(3) above must be provided to the client on paper or on any other durable medium available and accessible to the client.

Notes

(i)

Paragraph 1(1) covers all communications with the client, including oral statements and telephone calls.

(ii)

Indicative behaviours arising in respect of Chapter 6 (Your Client and Introductions to third parties) of the SRA Code of Conduct provides that you ought not in connection with regulated activities have any arrangement with other persons under which you could be constrained to recommend to clients or effect for them (or refrain from doing so) transactions in some investments but not others, or with some persons but not others, or through the agency of some persons but not others; or to introduce or refer clients or other persons with whom the firm deal to some persons but not others. However, these provisions do not apply to arrangements in connection with regulated mortgage contracts, general insurance contracts or pure protection contracts.

(iii)

Paragraphs 1(2) and 1(3) apply to contracts of insurance other than life policies. Firms who are not authorised by the FCA are not allowed to recommend the buying of life policies, but they can make recommendations and advise on other contracts of insurance.

(iv)

Reference to a durable medium in paragraph 1(4) is to a form that allows for the storage of information to be reproduced without changes. This includes floppy disks, CD-roms, DVDs and hard drives where emails are stored.

2

Suitability

(a)

Before a firm recommends a contract of insurance (other than a life policy) the firm must take reasonable steps to ensure that the recommendation is suitable to the client's demands and needs by:

(i)

considering relevant information already held;

(ii)

obtaining details of any relevant existing insurance;

(iii)

identifying the client's requirements and explaining to the client what the client needs to disclose;

(iv)

assessing whether the level of cover is sufficient for the risks that the client wishes to insure; and

(v)

considering the relevance of any exclusions, excesses, limitations or conditions.

(b)

Where the firm recommends a contract of insurance that does not meet the needs of the client because there is no such contract available in the market, this should be disclosed to the client.

3

Demands and needs statement

(a)

Where a firm recommends a contract of insurance (other than a life policy) or arranges a contract of insurance, the firm must, before the contract is finalised, provide the client with a written demands and needs statement that:

(i)

sets out the client's demands and needs on the basis of the information provided by the client;

(ii)

where a recommendation has been made, explains the reason for recommending that contract of insurance;

(iii)

reflects the complexity of the insurance contract being proposed; and

(iv)

is on paper or on any other durable medium available and accessible to the client.

(b)

Where a firm arranges a contract of insurance on an execution-only basis, the demands and needs statement need only identify the contract of insurance requested by the client, confirm that no advice has been given and state that the firm is undertaking the arrangement at the client's specific request.

(c)

The requirement in paragraph 3(1) to provide the client with a written demands and needs statement before the contract is finalised will not apply in the following circumstances:

(i)

where the firm acts on the renewal or amendment of a contract of insurance other than a life policy if the information given to the client in relation to the initial contract is still accurate and up-to-date. If the information previously disclosed has changed, the firm must draw the attention of the client to the matters which have changed before the renewal or amendment takes place;

(ii)

where the information is provided orally at the request of the client;

(iii)

where immediate cover is required;

(iv)

where the contract is concluded by telephone; or

(v)

where the firm is introducing the client to an authorised person or an exempt person and taking no further part in arranging the contract of insurance;

save that in (b), (c) and (d) above the information contained in the written demands and needs statement must be provided to the client immediately after the conclusion of the contract of insurance.

Notes

(i)

Reference to a durable medium in paragraph 3(1)(d) is to a form that allows for the storage of information and allows the information to be reproduced without changes. This includes floppy disks, CD-Roms, DVDs and hard drives where emails are stored.

(ii)

Paragraph 2 and 3(1) apply to contracts of insurance other than life policies. Firms who are not authorised by the FCA are not allowed to recommend the buying of life policies, but they can make recommendations and advise on other contracts of insurance.

4

Exclusion for large risks

(a)

Paragraphs 1 - 3 above do not apply where a firm carries on insurance mediation activities for commercial clients in relation to contracts of insurance covering risks within the following categories:

(i)

railway rolling stock, aircraft, ships (sea, lake, river and canal vessels), goods in transit, aircraft liability and liability of ships (sea, lake, river and canal vessels);

(ii)

credit and suretyship, where the policyholder is engaged professionally in an industrial or commercial activity or in one of the liberal professions, and the risks relate to such activity;

(iii)

land vehicles (other than railway rolling stock), fire and natural forces, other damage to property, motor vehicle liability, general liability, and miscellaneous financial loss, in so far as the policyholder exceeds the limits of at least two of the following three criteria:

(A)

balance sheet total: €6.2 million;

(B)

net turnover: €12.8 million;

(C)

average number of employees during the financial year: 250.

5

Notification of establishment and services in other Member States

If a firm wishes to exercise the right conferred by Article 6 of the Insurance Mediation Directive to establish a branch or provide cross-border services in another EEA state, an appropriate application must be made directly to the FCA. The Rules under the FCA's Supervision Manual, SUP 13, Exercise of Passport Rights by UK firms, contain details of the applicable process. A firm proposing to provide such services must comply with the applicable provisions of the Act, as laid down in the FCA's Professional Firms' Sourcebook Chapter 7 as amended from time to time.

APPENDIX 2: Credit-related Regulated Activities

1

Disclosure of information

(a)

Where a firm undertakes credit-related regulated activities for a client, it must ensure that information in connection with such activities and any agreements to which they relate is communicated to the client in a way that is clear, fair and not misleading.

(b)

Where a firm carries on the activity of credit broking, it must indicate in any advertising and documentation intended for consumers or clients the extent and scope of its credit broking activities, in particular whether the firm works exclusively with one or more lenders or as an independent broker.

2

Regulated credit agreements

(a)

Where a firm carries on a credit-related regulated activity involving a proposed regulated credit agreement, it must;

(i)

provide adequate explanations to the client in order to enable the client to assess whether the proposed regulated credit agreement is suitable to the client's needs and financial situation; and

(ii)

when providing such explanations, comply with the requirements of Article 5(6) of the Directive 2008/48/EC on credit agreements for consumers.

(b)

Before entering into a regulated credit agreement as lender, the firm must assess the client's creditworthiness on the basis of sufficient information to enable the firm to make the assessment, where appropriate such information will be obtained from the client and, where necessary, from a credit reference agency.

(c)

After entering into a regulated credit agreement where a firm is the lender, if the parties agree to change the total amount of credit, the firm must update the financial information the firm holds concerning the client and assess the client's creditworthiness before any significant increase in the total amount of credit.

(d)

In the event of a firm assigning to a third party its rights as lender in relation to a regulated credit agreement, the firm must inform the client of the assignment.

3

Appropriation of payments

Where a firm is entitled to payments from the same client in respect of two or more regulated credit agreements, the firm must allow the client to put any payments made, in respect of those agreements, towards the satisfaction of the sum due under any one or more of the agreements in such proportions as the client thinks fit.

4

Consumer Credit Guidance

Where a firm undertakes credit-related regulated activities, it must have regard to any guidance issued by the SRA from time to time relating to such activities.

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