COBS 9B.10 Systems and controls

In addition, firms are reminded: 

1. (1) of their obligations in SYSC to implement and maintain relevant systems, controls, policies and procedures, which should be sufficient to enable firms to ensure compliance with the rules in this chapter; and

2. (2) that in considering the competence and capabilities of relevant individuals involved in the design and delivery of a targeted support service, they should consider relevant provisions, including in SYSC 3.1 (Systems and controls), SYSC 5.1 (Skills, knowledge and expertise) and TC.

    

In complying with its obligations under SYSC and TC, a firm should ensure that employees involved in the design or delivery of a targeted support service are appropriately trained, supervised and supported, in particular so as to be able to:

1. (1) identify when a client can be aligned with a consumer segment; and

2. (2) appropriately consider, and respond to, any information provided by a client which is beyond that necessary to determine whether the client aligns with a consumer segment.

    

As part of a firm’s general obligation to monitor the outcomes that retail customers experience from its products (PRIN 2A.9.1R and PRIN 2A.9.8R), a firm should particularly monitor the outcomes which are generated by its targeted support service. In particular, a firm should use this monitoring to:

1. (1) identify whether the targeted support service is consistent with delivering good outcomes including that, at the point at which the service is delivered to clients, the firm has properly addressed the risk of ready-made suggestions leading to harm as a result of:
   1. (a) the firm’s design of its consumer segments;
   2. (b) the specification of the firm’s ready-made suggestions;
   3. (c) the firm’s processes to align clients with consumer segments; or
   4. (d) the firm’s ready-made suggestions no longer being suitable for individuals in the relevant consumer segment;
2. (2) understand whether clients in particular situations or with particular characteristics are routinely unable to be aligned with a consumer segment to inform the potential development of new consumer segments; and

3. (3) consider whether any product being used for a ready-made suggestion remains aligned with the relevant consumer segment including, for example, where the product manufacturer has made a significant adaptation to that product.

    

The requirements to monitor outcomes in this chapter:

1. (1) do not require a firm that provides a targeted support service to undertake ongoing suitability assessments (including the periodic reviews of product suitability set out in COBS 9 and COBS 9A) for clients who have previously received a targeted support service (unless the firm’s service to the client includes periodic assessment of suitability);

2. (2) take account of how firms should be acting in relation to their targeted support service in light of what is required of these firms under PROD 3, PROD 4 and PRIN 2A (as applicable) where they are also manufacturers or distributors of designated investments that are included in ready-made suggestions.

    

A firm must, in relation to a product that has been or may be recommended in a ready-made suggestion, have appropriate arrangements in place to:

1. (1) review information made available to it by the manufacturer of the product in relation to:
   1. (a) any significant adaptation to the product; or
   2. (b) mitigating actions a product manufacturer has taken or proposes to take in relation to the product; and

2. (2) consider whether any circumstances in (1) mean the product should no longer be recommended in that ready-made suggestion.

    

1. (1) Where a distributor recommends a product as part of a targeted support service, it will need to ensure the arrangements it has to meet requirements in PRIN 2A.3, PRIN 2A.4, PROD 3 and/or PROD 4 enable it to obtain all necessary information from the product manufacturer to understand the product, including its features, risks and costs.
2. (2) For the purposes of COBS 9B.10.6R(1), firms should have in place arrangements with the product manufacturer to obtain information about any significant adaptation to the product within the meaning of PRIN 2A.3, PROD 3 or PROD 4 (as appropriate).   

3. (3) When considering whether a significant adaptation (or other change) to a product means that it should no longer be recommended in a ready-made suggestion, firms should take into account the potential impact it could have on individuals in the consumer segment – for example, the effect of features being added to, or removed from, the product or changes to the target market.

    

1. (1) Firms should consider whether any information they receive from product manufacturers is relevant to their monitoring obligations under PRIN 2A (or, where relevant, under PROD) and indicates any circumstances that would require the firm to be taking appropriate action, for example under PRIN 2A.9.12R.

2. (2) Firms should consider what action is appropriate in light of the situation identified. For example, in certain circumstances, the specific information may mean the firm should consider, where it is appropriate, notifying the client of any changes to the product, and prompting them to consider taking further action including potentially a further targeted support service (including from the firm) or other advice, to enable the client to take appropriate steps.

    

A firm must review its processes for the provision of its targeted support service, including the ready-made suggestions:

1. (1) regularly; and
2. (2) with appropriate frequency.

The frequency with which the review in COBS 9B.10.9R is undertaken should be determined having regard to such matters as:

1. (1) the consumer segments the firm has created, including the complexity of those consumer segments;
2. (2) the complexity of the ready-made suggestions provided as part of the targeted support service;
3. (3) the number of clients to whom the firm has offered its targeted support service;
4. (4) the nature of the products distributed in connection with the ready-made suggestions; and
5. (5) any other relevant external factors such as:
   1. (a) changes to the relevant regulatory requirements, including to the FCA Handbook;
   2. (b) relevant technological developments; and

   3. (c) relevant changes to the market.

       

1. (1) SYSC 3 and SYSC 9 (as applicable) contain high level requirements in relation to record keeping.

2. (2) Firms should ensure that the records which they retain are sufficient to enable the FCA to monitor the firm’s compliance with the requirements in this chapter relating both to the design and delivery of their targeted support services.