ECO 1
INCOMING
ECA PROVIDERS
ECO 1.1
Application and purpose
- 01/12/2004
Application
ECO 1.1.1
See Notes
This chapter applies to an incoming ECA provider, with respect to:
- (1) the carrying on of an electronic commerce activity;
- (2) from an establishment in an EEA State other than the United Kingdom; and
- (3) with or for a UK ECA recipient.
- 21/09/2002
ECO 1.1.2
See Notes
ECO as
a whole operates against the background of a key element of the E-Commerce Directive,
namely the freedom of ECA provider from one EEA State to carry on
an electronic commerce
activity freely into another EEA State. An incoming ECA provider has to comply with
the applicable laws in the country
of origin from which the service is provided, and not the laws
in the place where the consumer is
located, subject to derogations from that principle. The applicable UK rules under those
derogations are set out, or referred to, in this chapter.
- 21/09/2002
ECO 1.1.3
See Notes
This freedom is conferred on incoming ECA providers by the ECD Regulations, and is carried forward by this chapter and other provisions of the FSA's Handbook to which this chapter refers. However, this freedom is qualified by certain other rules in this chapter. These rules are based either on the 'consumer contract derogation' or on the 'insurance derogation', which give Host States continuing responsibility for consumer protection in certain areas. Both derogations are set out in the Annex to the directive.
- 21/09/2002
ECO 1.1.4
See Notes
This chapter applies only in relation
to electronic commerce
activities provided to a UK
ECA recipient. ECO
1.2 (Provision
of essential information to consumers) applies in relation to electronic commerce activities supplied
to a UK ECA recipient who
is a consumer. ECO
1.3 (Provision of insurance services)
applies in relation to relevant services provided to a UK ECA recipient, whether or not the recipient
is a consumer.
- 21/09/2002
ECO 1.1.5
See Notes
The E-Commerce Directive also allows the EEA State where the recipient is based to restrict the freedom to provide an electronic commerce activity from another EEA State on a case by case basis, where certain conditions are met. This derogation is implemented in the United Kingdom through provisions of the ECD Regulations. ENF 19 outlines the derogation power and the FSA's policy on its use in relation to incoming ECA providers.
- 21/09/2002
Application of other parts of the Handbook
ECO 1.1.6
See Notes
Except for the provisions set out in ECO 1.1.10 R, the Handbook does not apply to an incoming ECA provider acting as such.
- 01/11/2002
ECO 1.1.7
See Notes
Notwithstanding the provisions of the E-Commerce Directive, an incoming ECA provider's Home State (when different from its country of origin) will continue to have certain responsibilities, such as prudential supervision of that provider and its branches and ensuring that it has the appropriate compensation scheme as required by Community law. As such, an incoming ECA provider, that is an authorised person, is subject to the relevant parts of the Handbook. This means that an incoming ECA provider that is an EEA branch of a UK firm is subject to, for example, IPRU and COMP continues to be relevant to its activities.
- 21/09/2002
ECO 1.1.8
See Notes
The FSA has a range of investigation and enforcement powers available to it where an incoming ECA provider appears to be in breach of rules to which it is subject under ECO 1. These include powers to seek injunctions (see ENF 6), to apply to a court for restitution (see ENF 9) and, in the case of authorised persons, to order restitution (see ENF 9) and take disciplinary action (see ENF 11 to ENF 13).
- 21/09/2002
ECO 1.1.9
See Notes
The market abuse regime and misleading statements and practices offences are not affected by the E-Commerce Directive. The FSA's enforcement powers in this regard are described in ENF 14 and ENF 15. The FSA's Code of Market Conduct (MAR 1) contains guidance on whether or not behaviour amounts to market abuse.
- 21/09/2002
ECO 1.1.10
See Notes
Handbook provisions applicable to, or relevant for, incoming ECA providers. This Table belongs to ECO 1.1.6 R
| Provision | Description |
| ECO 1 | E-Commerce Directive sourcebook |
| MAR 1 | The Code of Market Conduct |
| DEC (if the incoming ECA provider is authorised) | Decision making by the FSA |
| AUTH 1.2.6 G, AUTH 2.4.3 G, AUTH 2.4.7 G, AUTH 2.8.2 G - AUTH 2.8.15 G, AUTH 2.9.1 G, AUTH 2.9.18 G AUTH 5.1.1 G - AUTH 5.1.2 G, AUTH 5.6.5 G, AUTH 5 Annex 3 | Authorisation guidance |
| ENF | Enforcement guidance |
| GEN 2 | Interpreting the Handbook |
| COAF | Complaints against the FSA |
| SUP 8 | Waivers and modification of rules |
| SUP 9 | Individual guidance |
| SUP 14 (if the incoming ECA provider is authorised) | EEA firms change of details |
- 01/02/2004
ECO 1.2
Provision of essential information to consumers
- 01/12/2004
Requirement to provide essential information
ECO 1.2.1
See Notes
Before entering into a contract with a UK ECA recipient who is a consumer, an incoming ECA provider must supply the recipient with essential information in English relevant to the contract.
- 01/12/2004
ECO 1.2.2
See Notes
ECO 1.2.1 R requires an incoming ECA provider to provide a consumer with essential information, as envisaged by the E-Commerce Directive. ECO 1.2.6 E and ECO 1.2.7 E suggest that an incoming ECA provider should meet this requirement in one of two ways:
- (1) ECO 1.2.6 E gives an incoming ECA provider the option of complying with relevant UK Host State requirements relating to the provision of essential information; or
- (2) alternatively, ECO 1.2.7 E allows an incoming ECA provider to comply with requirements imposed by its country of origin which correspond to those of the United Kingdom.
- 21/09/2002
Exceptions: insurance
ECO 1.2.3
See Notes
ECO 1.2.1 R does not apply to an insurer with respect to insurance business, where the activity:
- (1) is carried on by an insurer which has received official authorisation in accordance with article 6 of the First Life Directive or the First Non-Life Directive; and
- (2) falls within the scope of the Insurance Directives;
but the insurer must instead comply with ECO 1.3.1 R.
- 21/09/2002
Exceptions: deposits, general insurance contracts, pure protection contracts and re-insurance
ECO 1.2.4
See Notes
- (1) ECO 1.2.1 R does not apply to an incoming ECA provider with respect to an electronic commerce activity relating to:
- (a) a deposit (other than a cash deposit ISA); or
- (b) (if ECO 1.2.3 R does not apply) a general insurance contract, pure protection contract or reinsurance contract;
- but, instead, the incoming ECA provider must comply with (2).
- (2) before entering into a contract with a UK ECA recipient who is a consumer, an incoming ECA provider must indicate to the recipient whether the contract falls within the jurisdiction of:
- (a) any dispute resolution scheme operating in the EEA; and
- (b) in the case of services within (1)(b), any compensation scheme operating in the EEA;
- and, if either or both of (a) and (b) apply, must identify each such scheme.
- 21/09/2002
ECO 1.2.5
See Notes
ECO 1.2.4 R (2)(b) does not require a deposit taking incoming ECA provider to mention a deposit
guarantee scheme, but its Home
State will require it to do so in accordance with the Deposit Guarantee Directive.
- 21/09/2002
Exceptions: regulated mortgage contracts
ECO 1.2.5A
See Notes
ECO 1.2.1 R does not apply to an incoming ECA provider with respect to an electronic commerce activity which relates to a regulated mortgage contract.
- 01/12/2004
Exception: activities (other than insurance) from EEA States which have implemented the DMD
ECO 1.2.5B
See Notes
ECO 1.2.1 R does not apply to an incoming ECA provider with respect to an electronic commerce activity, if the following conditions are satisfied:
- (1) the activity is not insurance business which:
- (a) satisfies the conditions in ECO 1.2.3 R; and
- (b) is carried on by an insurer; and
- (2) the EEA State from which the activity is provided has implemented the DMD with the result that the obligations provided for by the DMD are applied when the incoming ECA provider is carrying on the activity from an establishment in that State with a UK ECA recipient in the United Kingdom.
- 01/12/2004
Provision of essential information to consumers: UK requirements
ECO 1.2.6
See Notes
- (1) In order to comply with ECO 1.2.1 R, before entering into a contract with a UK ECA recipient who is a consumer, an incoming ECA provider should comply with the following UK requirements:
- (a) in every case where COB 6.2 (Provision of key features) or COB 6.4 (Product disclosure: special situations) would require the provision of key features, provide the information identified in the rules listed in ECO 1.2.9 E;
- (b) when it communicates a specific non-real time financial promotion which is an incoming electronic commerce communication, ECO 1.2.10 E and ECO 1.2.11 E (Essential information: specific non-real time financial promotions which are incoming electronic commerce communications);
- (c) when it communicates a direct offer financial promotion which is an incoming electronic commerce communication, provide the information identified in the rules listed in ECO 1.2.12 E; and
- (d) where relevant, ECO 1.2.13 E and ECO 1.2.14 E (Essential information: direct offer financial promotion of higher risk products).
- (2) The requirements in (1)(a) and (c) only apply to the extent that they would apply to a firm carrying on business from an establishment in the United Kingdom with or for the UK ECA recipient.
- (3) The requirements in (1)(b) apply subject to the exemptions in COB 3.2.5 R (exemptions) (but disregarding any exemption which applies purely because the promotion is an incoming electronic commerce communication).
- 01/11/2002
Provision of essential information to consumers: country of origin requirements
ECO 1.2.7
See Notes
If an incoming ECA provider engages in conduct which is in conformity with provisions:
that conduct is to be treated as conduct in conformity with those UK requirements.
- (1) corresponding to the UK requirements set out in ECO 1.2.6 E (1); and
- (2) made by a body or authority in an EEA State other than the United Kingdom;
- 21/09/2002
Effect of compliance with ECO 1.2.6 E (UK requirements) or ECO 1.2.7 E (country of origin requirements)
ECO 1.2.8
See Notes
- (1) Compliance with ECO 1.2.6 E (1), directly or through engaging in conduct as set out in ECO 1.2.7 E, may be relied on as tending to establish compliance with ECO 1.2.1 R.
- (2) Contravention of ECO 1.2.6 E (1) (including failure to engage in conduct as set out in ECO 1.2.7 E) may be relied on as tending to establish contravention of ECO 1.2.1 R.
- 21/09/2002
ECO 1.2.9
See Notes
Provision of essential information to consumers: key features. This table belongs to ECO 1.2.6 E (1)(a)
| COB rule | Description |
| COB 6.5.15 | Projections: an example |
| COB 6.5.19 R (1) | Projections: an example |
| COB 6.5.19 R (3) | Projections: an example |
| COB 6.5.40 R (1)(a) and COB 6.5.40 R (1)(c) | Further information for life policies, schemes, insurance or equity ISAs, PEPs or stakeholder pension schemes |
| COB 6.5.40 R (3) | Further information for life policies, schemes, insurance or equity ISAs, PEPs or stakeholder pension schemes |
| COB 6.5.40 R (4)(a) - (g), (i) - (p) | Further information for life policies, schemes, insurance or equity ISAs, PEPs or stakeholder pension schemes |
| COB 6.5.40 R (5)(a) - (b), (d) - (g) | Further information for life policies, schemes, insurance or equity ISAs, PEPs or stakeholder pension schemes |
| COB 6.5.40 R (6) | Further information for life policies, schemes, insurance or equity ISAs, PEPs or stakeholder pension schemes |
| COB 6.5.42 R (3) - (10), (12) - (14) | Information requirements for cash deposit ISAs, friendly society tax-exempt policies, traded life policies and broker funds |
| COB 6.5.43 R | Friendly society tax exempt policies |
| COB 6.5.44 R | Traded life policies |
- 21/09/2002
Provision of essential information to consumers: specific non-real time financial promotions which are incoming electronic commerce communications
ECO 1.2.10
See Notes
An incoming ECA provider should ensure, when it communicates a specific non-real time financial promotion which is an incoming electronic commerce communication to a UK ECA recipient who is a consumer, that the financial promotion includes:
- (1) a description of:
- (a) the main features of the product or service;
- (b) the total price to be paid by the consumer under the contract, including all related fees, charges and expenses or, if this cannot be given, the basis for the calculation of the price;
- (c) any risks associated with the specific features of the contract; and
- (2) the name and address or contact point of the person with whom the consumer would enter into a contract.
- 01/11/2002
ECO 1.2.11
See Notes
An incoming ECA provider should ensure, when it communicates a specific non-real time financial promotion which is an incoming electronic commerce communication to a UK ECA recipient who is a consumer, that any essential information provided to the consumer about the past performance of specified investments or of a firm includes, where relevant to the contract, a statement to the effect that past performance should not be seen as an indication of future performance.
- 01/11/2002
ECO 1.2.12
See Notes
Provision of essential information to consumers in direct offer financial promotions. This Table belongs to ECO 1.2.6 E (1)(c)
| COB rule | Description |
| COB 3.9.6 R (1), as regards the information in COB App 1.1.1 R(6) and (7) | Required information for certain direct offer financial promotions |
| COB 3.9.12 R (1) | Execution-only dealing services |
| COB 3.9.15 R (1) | Investments which can fluctuate in value |
| COB 3.9.18 R | Life policies |
| COB 3.9.6 R (1), as regards the information in COB App 1.1.1 R(17) | Cancellation rights |
| COB 3.9.23 R | Charges for regulated collective investment schemes |
- 21/09/2002
Provision of essential information to consumers: direct offer financial promotion of higher risk products
ECO 1.2.13
See Notes
- (1) An incoming ECA provider should ensure, when it communicates a direct offer financial promotion which is an incoming electronic commerce communication relating to:
- (a) an unregulated collective investment scheme; or
- (b) a derivative; or
- (c) a warrant; or
- (d) a broker fund;
- that the UK ECA recipient, if a consumer, is provided with the essential information set out in the table in ECO 1.2.14 E, in the case of an unregulated collective investment scheme, (2) in the case of a derivative, (3) in the case of a warrant and (4) in the case of a broker fund.
- (2) An incoming ECA provider should ensure that the essential information required by (1) is included in the direct offer financial promotion in a manner that will bring it to the attention of the consumer.
- 01/11/2002
ECO 1.2.14
See Notes
Provision of essential information to consumers: direct offer financial promotion of higher risk products. This table belongs to ECO 1.2.13 E
| Product | Essential information required |
| (1) Unregulated collective investment schemes | Information about risks associated with the specific features of the contract, in particular that: (i) the product is not regulated and may have a complex structure; (ii) it may not be possible for the consumer to redeem his units or shares within a reasonable time after purchase; (iii) the redemption price may not directly reflect the value of the underlying assets; and (iv) consequently, the risks associated with this product are such that it may be difficult for the consumer to assess the benefits and drawbacks of the product. |
| (2) Derivatives (including spread bets) | Information about risks associated with the specific features of the contract, in particular that: (i) the value of the investment may change significantly at short notice; (ii) it may expose the consumer to the risk of a loss greater than the amount originally invested (if this is the case); (iii) it may expose the consumer to the risk of losing the entire amount invested (if this is the case); and (iv) consequently, the risks associated with this instrument are such that it may be difficult for the consumer to assess the benefits and drawbacks of the product. |
| (3) Warrants | Information about risks associated with the specific features of the contract, in particular that: (i) the value of the investment may change significantly at short notice; (ii) it may expose the consumer to the risk of losing the entire amount invested (if this is the case); and (iii) consequently, the risks associated with this product are such that it may be difficult for the consumer to assess the benefits and drawbacks of the investment. |
| (4) Broker funds | Information about risks associated with the specific features of the contract, in particular that: (i) broker funds are potentially complex and risky products; (ii) in particular, the charges may be complex and give rise to conflicts of interest; and (iii) consequently, the risks associated with this product are such that it may be difficult for the consumer to assess the benefits and drawbacks of the product. |
- 21/09/2002
ECO 1.3
Provision of insurance services
- 01/12/2004
ECO 1.3.1
See Notes
ECO 1.2.1 R (Requirement to provide essential information) does not apply to an insurer with respect to insurance business where the activity:
- (1) is carried out by an insurer which has received official authorisation in accordance with article 6 of the First Life Directive or the First Non-Life Directive; and
- (2) falls within the scope of the Insurance Directives;
but instead such an insurer must comply with the provisions of COB set out in the Table in ECO 1.3.3 R when it deals with a UK ECA recipient.
- 21/09/2002
ECO 1.3.2
See Notes
The insurance derogation set out in the
Annex to the E-Commerce
Directive allows the United
Kingdom, as a Host
State, to continue to apply its own local rules to an insurer,
where the latter is providing an electronic
commerce activity to a UK
ECA recipient, in circumstances where these Host State rules fall within the scope of
any of the Insurance Directives.
Against this background, the FSA believes
it is appropriate that certain of the requirements of COB 3 (Financial promotion) and COB 6 (Product
disclosure and the customer's right to cancel or withdraw) should continue
to apply to the provision of these services.
- 21/09/2002
ECO 1.3.3
See Notes
Provision of insurance services. This table belongs to ECO 1.3.1 R
| The following provisions (of COB): | Description |
| COB 3 (entire chapter) | Financial promotion |
| COB 6.1 | Packaged product and ISA disclosure |
| COB 6.2 | Provision of key features |
| COB 6.4 | Product disclosure: special situations |
| COB 6.5 (except COB 6.5.40 R (1)(b), COB 6.5.47 R, COB 6.5.48 G and COB 6.5.49 R) | Content of key features |
| COB 6.6 | Projections |
- 21/09/2002
ECO 1.3.4
See Notes
The COB rules set out in ECO 1.3.3 R do not include COB rules that implement mandatory provisions from the Insurance Directives, such as those provisions in Annex II to the Third Life Directive, as these fall outside the scope of the insurance derogation in the E-Commerce Directive and must be implemented by an incoming ECA provider's country of origin.
- 21/09/2002
ECO 1.3.5
See Notes
Any information provided by an incoming ECA provider that
is an insurer to
a UK ECA recipient must
be provided in English.
- 21/09/2002