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CISI hits out at FCA inducement ban

Christmas giftsThe Chartered Institute for Securities & Investment has warned of unintended consumer detriment under the FCA’s proposed inducements ban.

The CISI says while “extravagant hospitality gifts and monetary inducements are clearly unacceptable”, a blanket ban could restrict the opportunity for optimum knowledge sharing, networking and mutual understanding of products and services available across the industry.

The professional body says: “If firms feel as though they cannot take a client, competitor or supplier out for lunch, or accept a space at a conference, for example, then opportunities for people to understand each other will be missed.”

It adds: “These activities offer the possibility of collaboration, communication and development, which ultimately benefit the end user, and an outright ban may prove to ultimately disadvantage consumers.”

The CISI has also hit out against the FCA’s proposals that minimum qualifications should apply only to staff that give “personal recommendations” – or advice – as opposed to those offering guidance.

It says: “This move is counterintuitive and could result in a detrimental end result for consumers.

“Customers expect to deal with suitably qualified professionals, who they trust, when having discussions about their finances.”

Given the sector is tainted by historical mis-selling scandals, in taking a more narrow stance on requisite qualifications, the CISI says the FCA’s stance is not helping restore consumers’ trust in the sector.

It adds: “While there will be many informed consumers who will appreciate the difference between recommendations and guidance, there will be many – perhaps more – who are not aware of this subtle difference.

“In any case it is our belief that clients would expect the individual they are dealing with to undergo training and competence and have relevant qualifications, irrespective of whether they are providing recommendations or guidance.”

That said, the CISI “broadly welcomes” the FCA’s proposals over complaint handling and consumers’ ability to access the Financial Services Compensation Scheme whether advice or guidance was offered.

CISI chief executive Simon Culhane believes that as technology helps reduce the cost of training, expense should not be given as a reason for firms to limit the number of staff gaining useful and necessary training and qualifications.

“We are not convinced that the FCA has analysed exactly how these two issues, of banning inducements and restricting qualifications, are likely to ultimately hurt the end user, the consumer.”

He adds: “The CISI invites the FCA to engage us in a discussion about how T&C can be delivered in a cost-effective way to a wide audience, as we strongly believe that there is nothing to gain by shrinking the knowledge pool.”


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. COBS guidance on inducements states, amongst many things, that there is an “ obligation of a firm to act honestly, fairly and professionally in accordance with the best interests of its clients”.

    Although I have not been an adviser for over 11 years, there are a number of factors that trouble me with inducement ‘guidance’.

    I find it inconceivable that any adviser, especially in a post RDR world would be influenced by a ‘day at the races’. To suggest otherwise is grossly maligning the professional, ethical status of advisers.

    Financial services companies put vast amounts of money into sport. They do it for many reasons, brand awareness mostly, without the sums involved many sports would not survive and as a result the participants and the fans would suffer.
    If, as part of that ‘sponsorship’, those firms wish to ask some advisers along as a way of demonstrating appreciation of a business relationship, what is so toxic about that?

    Firms like Standard Life (Ryder Cup) AEGON (LTA tennis) Aberdeen (Cowes Week- expired 2015) Investec (the Derby & Test Cricket) Vitality (athletics) Royal London (Cricket) LV= (Cricket) Aviva (athletics) M&G (Chelsea Flower Show) have generously supported these events.

    To do so, they have to commit for many years and some very large sums of money are involved. If these rules mean that the very people who ‘distribute’ their products can no longer attend, part of that sponsorship value has been diluted yet the sponsorship money paid cannot be refunded to reflect that fact.

    If hospitality is considered a no-go area for advisers, it may be of interest to know something of the hospitality and gifts that has been lavished upon- and accepted, by the Chairman and Executive Members of the FCA’s Board.

    In the interest of fairness, FCA rules at January 2016 stated that any gift with a value of £30 or more must be declared and surrendered so that it can be used within the FCA or charitably disposed of.

    Records from April 2013 onwards show gift and hospitality summaries, all strangely without an exact cost. We cannot see any information relating to the FSA, pre April 2013.

    Gifts included £450 worth of Aspinall Black Leather document case in June 2013 given to Martin Wheatley, a dinner and private viewing of an exhibition (courtesy of Ernst & Young) for Lesley Titcombe, 6 bottles of Bollinger given to Tracey ‘make mine Bolly’ McDermott by Slaughter & May on the 26th November 2014.

    I have no doubt that all FCA staff “act honestly, fairly and professionally but why would such gifts be given let alone accepted when they clearly cannot or should not be for personal consumption?

    Now for the dinners, again no value disclosed. The sheer number involved would seriously reduce weekly grocery and wine bills for many, possibly excepting Mr. Creosote.

    John Griffith-Jones comes out the clear winner. In fact I would be quite surprised if John Griffith Jones has any need for a kitchen given the massive roster of lunch and dinner engagements he has fitted in over the years. Still as they say, somebody has to do it.

    I was particularly amused by the notation attaching to a gift declaration given to Mr Griffith-Jones on the 29th May 2014 by the Indonesian Financial Services Authority simply stating, “Glass box containing a silver ship (1 sail damaged)”.

    I can only assume it must still be worth over £30 even in scrap value.

    Perhaps any vital dialogue with any of the above “could better take place without these activities”.

    Hospitality is not a dirty word yet the FCA seems intent on making it one when it apples to those they regulate.

    It is in their eyes a temptation rather than applying some adult thinking around personal responsibilities and the obligation of that firm to “act honestly, fairly and professionally in accordance with the best interests of its clients”.

    While acknowledging that there will always be times when accusatory fingers can and will be pointed (rather like mine is above) some element of what many would consider normal commercial practices should be encouraged.

    If the FCA pursue this route, where will it end in the interest of fairness? Will we see ALL corporate entertainment of any type in any industry or profession be declared illegal by parliamentary statute?

  2. Why would you take a competitor to lunch.

  3. When the FSA also stops accepting free launches, meetings, then and only then should they point the finger and tell other to stop.

    I have not forgotten being told by the regulator at meeting, how much weight he had put on whilst traveling around to relay this message.

    Business, all business relies on an element of entertainment. I wonder if when the regulator meets with Government departments, do they go out for a meal, have a drink at any stage?

    • One imagines that they may, and even perhaps more so when visiting with “twinned” regulatory bodies overseas on vitally important issues, it’s perfectly understandable why the FCA would need to confer face to face with Indonesian Regulators (WTF!??), or about MiFID and MiFID 2 (I wonder who’s going to star in MiFID 3, “The Advisers Strike Back” – won’t be Mr Spacey by the sound of it anyway. After all, how else are they going to be able to justify the hire of a private limousine to take them back to the airport for £3,600 (MR Sants!…).

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