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Aifa urges FSA to use leeway over directive

Aifa is urging the FSA to avoid imposing Mifid requirements on IFA firms.

The regulator is telling companies to exploit opportunities presented by the Mifid directive, such as cheaper passporting of services throughout the European Union.

But at a London conference last week, FSA managing director Hector Sants said firms should not underestimate the costs of reviewing systems and adapting them to Mifid. He said the benefits of the directive in terms of enhanced consumer protection are going to be significantly less in the UK than in some continental countries where investment advice is currently unregulated.

Aifa policy officer Vera Cottrell says: “At the moment, we do not know which out of scope firms will be affected. The FSA has leeway on whether to apply the rules to out-of-scope firms and should conduct a proper cost-benefit analysis.

“Our members are not likely to want to passport so they will not gain any benefit from Mifid and should not take on the extra costs.”

Mifid was originally thought to affect only firms handling client money but the FSA has made it clear that many more advisers will be brought into the regime as the new rules will be incorporated into its simplified conduct of business handbook next year.

The directive is set to come into force in November 2007,. Advisers will find out in the final quarter of this year whether they will be affected.

Sants said: “The implementation costs are likely to be significant and the benefits to the UK will be less easy to grasp. The clear cost of implementation of Mifid will only prove justified if firms take opportunities generated to raise revenues.”

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