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CPD: Financial services regulation and ethics

The latest edition of Newsbrief counts as 1 hour of structured CPD and covers the regulatory and marketplace changes which took place during February 2014. Visit the Money Marketing CPD Centre to answer 10 multiple choice questions and complete this CPD activity. Just click into your CPD Plan and you’ll find each month’s marketplace changes round-up in your activity list.

March 2014 CPD Newsbrief – Financial services regulation and ethics


FG14/1 clears the dance floor

Charlotte Mannouris
The FCA has published its final guidance on adviser inducements, in which it has taken a tough line on payments that it considers undermine the spirit of RDR.

The final guidance includes examples of poor practice that are likely to constitute breaches of COBS rules, among which is accepting provider hospitality to sports events, overseas trips and extravagant food and drink.

The message from the regulator is that before accepting any provider entertainment, advisers must ask themselves:  Is it reasonable? Does it benefit clients? Is there a better way of benefitting clients?

The FCA provides examples of good hospitality practice, which include ensuring promotional prizes are not extravagant and are linked to increased knowledge of a provider’s products and services rather than increased sales of them, but the guidance is not just restricted to ‘perks’. The FCA has warned providers about paying for ‘significant services’ for advisers, such as funding IT support services or contributing towards the cost of a seminar.

Many of the respondents called for changes to the Handbook itself, but the FCA is convinced that the rules as they are, together with the recently published guidance, are enough for firms to understand the FCA requirements and to make the necessary changes to their arrangements.

There is concern among smaller firms that the continuing ambiguity gives a competitive advantage to larger organisations with access to expert legal opinion, affording them the luxury of a more liberal interpretation of the rules and guidance. But of more concern is that the regulator will also be looking closely at the payments made by providers to advisers to furnish them with, for example, management information and customer/market data.

The FCA has now clarified that advisers are not to make a profit and derive ‘genuine business benefit’ from offering these services to providers, which many in the industry feel is a step too far.


Non-advised sales fall under FCA scrutiny

Charlotte Mannouris

The FCA has begun a thematic review into non-advised sales and simplified advice process, following an increase in the number of execution-only sales since the RDR implementation.

The FCA has written to a sample of execution-only firms asking them to analyse their business model, and consider the extent to which the risks of providing an execution-only service are factored into its design and implementation.  

The firms will have to explain their rationale for the product range they include in their service, and their approach for compiling any ‘best buy’ product lists. The FCA is also looking at their pre- and post-sale disclosure documentation, financial promotions and complaints data, and will be examining the nature of their relationships with product providers. 

There is a market for genuine execution-only sales – the problem lies in the how the clients interpret the guidance provided by non-advised firms. Many clients cannot tell the difference between what is advised and what is not advised, and the FCA says that execution-only sales could be subject to advice rules if the customer believes that they have received advice. Advisers are therefore vulnerable to claims if clients are not fully informed of the risks involved in particular investments and given the correct warnings and disclosure documentation.

The regulator makes no secret of its unease with the payment of commission for non-advised sales, so it would not come as a complete surprise if it introduced a ban following the review.

However, unless it can come up with an practical, alternative method of remunerating intermediaries who are not charging for advice because they aren’t giving any, the FCA should work with those firms it is interrogating to help create a robust and competitive ‘direct to consumer’ market in the same way it promotes a competitive advisory market.


The latest edition of Newsbrief counts as 1 hour of structured CPD and covers the regulatory and marketplace changes which took place during February 2014. Visit the Money Marketing CPD Centre to answer 10 multiple choice questions and complete this CPD activity.

Just click into your CPD Plan and you’ll find each month’s marketplace changes round-up in your activity list.

Not yet registered? Join for free today at and access over 35 hours of independent, accredited CPD learning content. 

Learning objectives (full list of ApEx standards covered below)



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