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&#39IFAs will register in France to beat DPS&#39

The defined-payment system could lead to IFAs relocating abroad or facing competition from European counterparts moving into the UK, according to Aifa.

The warning comes as part of Aifa&#39s first response to CP121 which focuses on the DPS, describing it as an anomaly.

It says: “We believe that it would be possible for advisers licensed in another member state to passport into the UK and describe themselves as independent without operating a DPS.

“Surely the FSA does not want to put UK advisers at a competitive disadvantage to their EU counterparts.”

Director general Paul Smee says the proposals present the real possibility of the so-called Calais IFA, where a UK firm registers itself in France but operates in the UK.

Under EU law, member states can introduce extra legislation if it is deemed for the “general good”.

But Aifa believes the FSA would have insufficient grounds to invoke additional legislation.

The FSA has previously justified CP121, saying it has to take European developments on board but some directives have changed.

The insurance mediation directive sets out EU-wide parameters for the regulation of life and pension business, allowing multi-ties, but Aifa says it makes no mention of the fee arrangements.

Aifa had previously persuaded the European Commission to reverse its position on the investment services directive allowing IFAs to work on commission.

Aifa director general Paul Smee says: “Some IFAs will find it ironic that it appears to be Brussels that has the clearer idea of how consumers prefer to pay for advice. It would be counterproductive if UK firms set up on the other side of the channel just to take advantage of a regulatory loophole.”

FSA spokeswoman Louise Buckley says: “This is something we are aware of and will take into account. We have to take this on board and make sure we are in line.”

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