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CP121 under threat as EU gets set to rewrite UK financial rules

The European Union is poised to rewrite the rules for UK financial services leaving the Treasury, the FSA and IFAs up in arms.

Last week&#39s EU summit in Barcelona said that it would adopt seven key financial directives as soon as possible ahead of the creation of a single financial services market by 2005.

The raft of legislation could outlaw execution-only business, bring in punitive capital adequacy requirements for investment IFAs, competition from Continental providers and brokers with lower regulatory requirements and pan-European pension legislation restricting investment freedom.

The FSA says the e-commerce directive risks consumer confusion, dual regulation and additional costs.

Treasury economic secretary Ruth Kelly has said the supplementary pensions directive “must not become an attempt to interfere with the structure of member states&#39 pension systems”, amid fears that it will restrict equity investment.

ABI head of European affairs Simon Gentry warns that the insurance mediation directive contains “perverse incentives”, with advisers facing higher burdens than companies selling financial products as a sideline.

Consultants are warning that the European moves could make CP121 and the Sandler review redundant.

Money Marketing understands the EU is considering more retail financial services legislation encompassing mortgages, private medical insurance and long-term care.

Financial Technology Research Centre director Ian McKenna says: “All the current regulatory reviews will have to be revisited. There is a real risk that firms could set up in different states without offering the same consumer protection.”

Hargreaves Lansdown chief executive Peter Hargreaves says: “The EU will drive business offshore.The rules on execution-only business will destroy our business.”

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