“European politicians reject plans for commission ban,making the FSA look increasingly isolated in Europe.The “final version of Mifid expected early next year, will combine the European Parliament’s amendments with those from the European Council – formed by representatives from national regulators – alongside the initial proposal from the European Commission.
“German MEP Markus Ferber first took steps to remove references to a commission ban in March, and there has been significant opposition to the ban, proposed by the European Commission from both advisers and fund managers on the continent”.
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.
So now, with this political rejection thrown into the mix, are we all about to start walking down Conundrum Street?
Where does this proposed ruling fit with FSMA 200 regarding UK compliance with EU directives, will RDR produce two tier regulation, opportunity and remuneration and how will it affect advisers and most importantly the Consumer?
Uncertainty is the impact for sure, the FSA has pressed on with RDR regardless of advices from many, including the TSC to hold off until Mifid II decisions are clear. The European parliament earlier this year was reportedly set to reject the introduction of a Europe-wide ban on commission paid to IFAs and that is what appears could be now happening.
The EU parliament’s economic and monetary affairs committee had removed references to the ban in amendments to a revised draft of Mifid II. The European Econ committee is proposing tougher disclosure rather than a Europe-wide ban on commission.
Swedish MEP and Econ member Olle Schmidt was on record as saying: “A total ban was not supported by the majority of Econ members”.
He went on to say: “If you introduce a ban, as in the UK, you can go too far. It would limit freedom of choice for ordinary investors and those most in need of advice would not be able to afford it. A more balanced approach is needed. There are other ways of safeguarding investor protection.”
As an industry we have all been led to believe by the regulator that they were as one with European Union regulation plans yet it would appear this might not now be true.
There are some overlaps with existing UK regulatory requirements and planned regulatory changes, such as the RDR, which could lead to implementation challenges for firms. For example, the MiFID II proposals set out that in order to qualify as ‘independent’, advice should be based ona ‘sufficiently large number of financial instruments available on the market’.
However, this is different to the definition adopted as part of the RDR.
In addition, the proposed scope of Mifid extends to include structured deposits but the confirmed scope of the RDR does not. Under the RDR changes, advisers giving restricted advice (as well as independent advisers) will not be able to receive commission. These differences will need to be addressed by the relevant bodies prior to Mifid implementation.
The TSC advised Messrs Sants & Turner earlier this year that EU rulings could throw up some difficulties with the grand plan and this clearly fell on deaf ears.
So with all this confusion swirling around, Linda Woodall has ‘upped the anti’ telling advisers “ Don’t be caught unprepared for RDR”. She wrote a very long article and when referring to implementation deadlines being only a few months away, she said, “it’s time to embrace the changes that both regulators and industry have worked so hard to achieve……….the FSA is committed to helping advisers achieve a charging model which works for them, their clients and for the future.
Think about this now before it’s too late. Any London-based advisers will be familiar with mayor Boris Johnson’s catch-phrase for travelling during the Olympics: ‘Don’t get caught out!’ This is sound advice for all as we prepare for the RDR.
Wise words that sadly only appear to apply one way, the FSA have a history of being caught out failing to listen to “sound advice”. Is this yet another example of the European Parliament’s amendments putting a spanner in the works at Canary Wharf?
Ms Woodall may wish to take something from the EU position, the great Mr. Dylan’s lyrics sum up that something very well:
“But if you do right to me, baby, I’ll do right to you, too
Ya got to do unto others Like you’d have them, like you’d have them, do unto you”
UK firms have spent quite enough time and money dealing with “having it done unto them” please do not have them spending any more until Mifid is 100% clear to all.