In September 1997, the (then) SIB issued Consultative Paper 111
which sought views on proposals to simplify the rules relating to
"cooling-off" (see FS Brief 29 page 10). The intention was to allow
firms to get across the "cooling-off" message in a number of
different ways, and give them more flexibility as to the way in
which investors could be repaid if they choose to cancel.
The proposed rules have now been adopted, introducing a much less
prescriptive regime and largely allowing firms to decide whether to
continue with their current arrangements or to take advantage of
the new flexibility. However, in relation to the extension of
cooling-off rights to OEICs, new mandatory requirements have been
Content of notification
Firms now have a discretion over the words used to convey the
"cooling-off" right. As a minimum, the firm must explain:
- That there is a right to cancel.
- The duration of that right.
- The steps the investor must take.
- The consequences of cancellation.
- Any costs which the investor will have to bear if the
investment suffers a market loss ("shortfall").
In addition, these rules are subject to general principles of: