(NB: Only the original text of the rules can be regarded as definitive).RULES APPLICABLE ONLY TO DISCRETE INVESTMENT BUSINESS (DIB) INVOLVING PACKAGED PRODUCTSWhen DIB involves packaged products and pension fund withdrawal arrangements, additional rules apply.1.

Definition of 'packaged products'Packaged products are defined by the SIBR as meaning life and pension policies, units in regulated collective schemes and shares acquired under investment trust savings schemes.

Regulated collective investment schemes are defined as meaning authorised unit trust schemes; overseas collective investment schemes recognised under the FSA; and open-ended investment companies (OEICs).

Investment trust savings schemes (ITSs) are defined as meaning 'dedicated' services 'for investment in the securities of one or more investment trusts within a particular marketing group'.In short, therefore, packaged products comprise:-- life and pensions policies-- unit trusts, SIB-recognised offshore products and OEICs-- investment trust shares which are bought via the managers rather than on the stockmarket (including new issues which are marketed to the public), and-- PEPs comprising unit trusts or shares acquired under an ITSS.Enterprise investment schemes (EISs) fall outside the definition of packaged products, as do venture capital trusts (VCTs).Accordingly, only module B(ii) qualified persons are permitted to deal in or advise on EIS and VCT schemes.For the purposes of entitlement to conduct DIB, a distinction is made between corporate pensions and advanced schemes and other types of packaged products.Only persons holding the Law Society's module C qualification are entitled to conduct business in corporate pensions, which are defined as meaning final salary or money purchase occupational pension schemes; additional voluntary contribution schemes; executive pensions policies; small self-administered schemes; group personal pensions (where the client is the employer, rather than the employee); self-invested personal pensions and pension fund withdrawal arrangements.2.

Best advice (SIBR appendix 7, part 2 para 4(1))No personal recommendations (as opposed to recommendations made in circular mail-outs or newsletters) may be made by a firm to buy a packaged product unless:(i) it has taken reasonable steps to inform itself about packaged products which are generally available on the market and(ii) it is not aware of another packaged product which would better meet the client's needs.The principle underlying this provision is generally known as 'best advice', although having regard to the burden of proving superlatives, the 1995 SIBR substituted references to 'standards of advice'.The principle, however, is unchanged: namely that, having satisfied the requirement of suitability (by determining what course of action is appropriate to the client, and i f a packaged product is involved, what product type is most suitable), the logical next step is to identify the product provider whose version of that product type is most advantageous to the client, having regard to all its relevant characteristics.

The duty implied in providing best advice to research the entire market and justify the resulting selection, is an onerous one, not only because of the large number of alternative providers but also the numerous complicated criteria for selection.

Evidence justifying best advice decisions must be kept on record for six years.3.

Key features documents (SIBR appendix 7 parts 1 and 2)Firms arranging packaged products and pension fund withdrawals must provide to their clients a self-contained statement about the product or arrangement, called a 'key features' document, which is adequate to enable the client to make an informed decision as to whether to proceed.

Appendix 7 part 1 requires that key features documents must be supplied:-- before or when making personal recommendations relating to life policies-- before or when arranging the purchase of a life policy on an execution-only basis-- before or when making personal recommendations to effect pension fund withdrawals-- before or when making personal recommendations relating to investments in or switches of holdings in regulated collective investment schemes, ITSs, and PEPs comprising either of these types of product (referred to in the rules as 'schemes')-- within five business days after arranging execution-only deals in respect of schemes.Key features documents will be supplied to intermediaries by product providers.4.

Commission disclosure (SIBR appendix 7, part 1, para 1)In situations where a firm or a permitted third party will receive commission in connection with a transaction arranged by the firm involving a packaged product; or where a client asks how much commission would be payable if such a transaction were to be arranged; or where the firm provides a key features document to the client: then in any such case the firm must disclose to the client in writing the total commission payable, including commission payable to a PTP in advance of the transaction.

Appendix 7 states that disclosure must distinguish between initial, renewal and level commission and must be made 'in cash terms'.

However, the Law Society has stated that when trial commission cannot be quantified in advance (eg because the premiums are index-linked or the commission is fund-based), disclosure in the same terms as stated in the product provider's key features documents, supplemented as appropriate by providers' illustrations, will satisfy the requirement.5.

'Reason why' letters (SIBR appendix 7, part 1, para 3Justification of the suitability of advice to effect or surrender regular premium life or pension contracts or annuities, or to arrange pension transfers or pension fund withdrawal arrangements, must be communicated to clients in the form of a 'reason why' letter before or as soon as practicable after the recommendation is made, and this must be retained for six years.

Good practice suggests that reason why letters should be provided in relation to all financial advice.

When the advice is given by a permitted third party, the instructing firm must obtain a copy of the PTP's reason why letter and pass this on to the client.