Non-Disclosure

FCA rules state firms must disclose both:

(a) The generic charging structure used (COBS 6.1A.11); and
(b) The total adviser (client specific) charge payable (COBS 6.1A.24).

(a) will be disclosed in ‘up front’ disclosure documents, such as initial disclosure documents, proposition documents or terms of business.

(b) will typically be disclosed in client specific documents, like fee agreements, engagement letters or client agreements.

In accordance with COBS 6.1A.25, a firm may include the information required by the rule on disclosure of total adviser charges (b) in a suitability report. ATEB would urge caution in this respect however and our recommendation is that the total adviser charge be disclosed in a separate, additional document, but confirmed in the suitability report. There are numerous reasons for this:

  1. The FCA rule requires the disclosure of (b) ‘as early as practicable’; while this is not defined, we suggest it should be as early as is feasibly possible because it cements the financial agreement between you and the client. If you disclose (b) in the suitability report, you have already undertaken significant work to prepare the recommendation before disclosing the total charge to the client and hence the client may dispute or refuse to agree to the charge.
  2. Although recommended, not all suitability reports will be issued pre-sale. Post sale SRs may not meet the ‘as early as practicable’ requirement.
  3. There are numerous additional and specific requirements for the disclosure of (b) (see COBS 6.1A.24 onwards and the FCA disclosure assessment template); therefore, a specifically designed document’ like a fee agreement, will better cater for these requirements.

Finally, and to be clear, you should always disclose all fees and charges in the suitability report; however, to avoid potential non-disclosure and breach of the total adviser charges rule (b), we recommend that a separate and tailored document be used for this purpose, which should be issued early in the advice process.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

About the Author

Director - Having joined us directly from university, David quickly developed into an indispensable member of the team. As our IT Director he is responsible for ATEB’s technology strategies, security systems and platforms. He has been at the forefront of the development of ATEB Suitability and instrumental in ensuring that the complex regulatory requirements are catered for in an interactive and intuitive fashion. He would be delighted to discuss its capabilities with you in more detail.

Contact Us

Explore more articles in this category

Other articles that you might be interested in