So now we have it, the FSA has been given the EU nod of approval to ban commission payments from providers to advisers in it’s implementation of RDR next year.
The EU parliaments final version of Mifid also makes clear that a ban on commissions or other financial inducements for independent adviser firms will apply across Europe too. But just to help create confusion the definitions of independent differ and the resulting outcome will be that independent advisers may be treated differently to those who are not or who may offer restricted advice.
Mifid is the key piece of EU regulation that is set to transform the way a range of instruments are traded in Europe. It aims to update and build on the reforms introduced by the 2007 directive, it is the European Commission’s proposed view on what the new rules ought to look like for all EU member countries.
The UK government does not often have influence or success when EU regulation collides with UK law but on this occasion there is some acknowledgement that individual countries regulators can plough their own furrow to a degree, so RDR looks safe as the FSA can press on with its RDR commission ban.
But there is genuine concern that these ‘just before midnight” changes and clarifications will raise very real fears that those choosing to plough the independent furrow will be treated differently to those who are not.
The EU Parliament voted on the final Mifid wording last week and it passes, when intergrated into the Council’s wording, into EU law
The skeptics out there should note that there is no reference to restricted advice and this will no doubt see the UK playing field being marked out differently, a sort of imperial versus metric job meaning the same but different.
The EU definition of independent advice is seen as considering “a sufficiently large number of investment products” which are “sufficiently diversified [by] type and issuers or product providers to ensure that the client’s investment objectives can be suitably met”.
Importantly though recommended products must not be limited to those offered by providers with “close links” to the adviser firm.
IFA Simon Mansell observed in FT Adviser On the 06/12/10 Michel Barnier, Commissioner for Internal Market and Services confirmed (to me) that the FSA would be unable to restrict inwardly passporting firms offering their services post RDR. For those subjected to FSA regulation they will be placed against heightened competition from other EEA states, paying commission not fees and they (UK advisers) will be unable to respond because their hands are tied by a rope called RDR. The FSA is not accountable to Treasury Ministers or to Parliament, and now it seems Europe! European Union law operates alongside the legal systems of the European Union’s member states but where conflict occurs, takes precedence over national law and that will include even the FSA! It seems that the FSA does not take this view!