Aifa warns passporting is no easy route to escape RDR
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Aifa has warned that firms should not see passporting into the UK under a foreign regulator as an easy route to escaping retail distribution review restrictions.
In a paper today, called Advice Horizons and sponsored by Legal & General, the trade body says some foreign regulators are often not as familiar with IFA issues as many countries do not have a large intermediary presence.
Aifa warns that it can be very difficult for firms to understand and align compliance requirements when they are under the jurisdiction of two different regulators.
The paper says: “An issue often raised is the potential for advisory firms currently based in the UK to move to another EU member state and passport back into the UK.
“The rationale for this move is that they would ’escape’ the demands of the RDR.”
Aifa says firms might look to do this in order to fall beyond the complaints regime of the Financial Ombudsman Service and not have to pay Financial Services Compensation Scheme levies.
But it says: “Firms must gain authorisation in the home state of their choice - and so deal with that nation’s regulators who are, in general, less experienced in dealing with intermediary firms – given the small scale nature of the IFA community abroad.”
Aifa says that firms passporting in would be subject to any regulatory changes the home state regulator decides to impose.
It adds: “The costs of setting up in a different country, managing the ’domestic’ legislative and regulatory demands, and also of supervising staff based in the UK can be demanding.
“It is not the easy option it may be portrayed as but, as firms out-source many of their activities, it is a matter that should not be ignored – especially given the tax plans of the UK Government.”
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Readers' comments (6)
Anonymous | 4 Aug 2010 2:23 pm
no compelling arguments for not doing it here..
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Julian Stevens | 4 Aug 2010 2:32 pm
It can only be better than the monumentally costly, corrupt and self-serving system which we're forced to fund at present.
And there'll be no levy to support the new Consumer Education quango either (as that's to be extorted by the FSA/CPMA).
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john roberts | 4 Aug 2010 3:08 pm
makes perfect sense to me, light touch compliance in another state and no rdr restrictions in uk
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Anonymous | 4 Aug 2010 8:50 pm
Brilliant. Asked to be qualified to one level above McDonalds staff*, advisers want to re-base to Malta instead. I'm sure with the positive perception the general public has of advisers, they'll understand.
"Tae see oursels as ithers see us"
* google 'mcdonalds qca 3'
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Simon Mansell | 13 Aug 2010 4:49 pm
Sorry this report is total tosh! Unlike the UK regulator the EU still respects human rights and the rule of law. . Freedom to trade is the corner stone of MiFID and the EU. It may well be that our European partners do not understand the UK system but that does rather beg the questions that the UK regulators have a better understanding than their EU counterparts. The UK regulator has outlawed the UK IFA and subjected him/her to the outrage of retrospective legislation and no protection under the rule of law. Could it be that the EU at its worst is better than the UK at it best - just look what the FSA is doing to the independent sector! The history of Europe reflects the movement of persecuted groups from one country to another (who then often flourish). As we speak many providers are moving out of the UK altogether and some like Zurich Direct are regulated via Dublin. Perhaps rather than the extinction of the independent sector RDR will herald the extinction of UK regulation as advisers seek the freedom to trade as an alternative to decimation via RDR. If you read the papers today you will see that the very legislators who inflicted us with the FSMA 2000 are themselves populated by members who have passported out of UK avoid by establishing their wives and business via Monaco etc and other widely reported tax exiles. What’s good for the goose is good for the gander.
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Anonymous | 13 Aug 2010 6:38 pm
"The history of Europe reflects the movement of persecuted groups from one country to another "
Well noted Simon The persecuters , if caught, were then hanged.They did not have the excuse that they were simply following orders.
We live in hope.
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