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Cummings raises point of bank factoring

Aifa director general Chris Cummings questions whether banks that own product providers will be allowed to provide factoring facilities to advisers under the retail distribution review.

The RDR consultation paper, published last month, proposed a ban on factoring, stating: “Under our new requirements, money taken from consumers’ investments to pay adviser charges must be matched by broadly concurrent payments to the adviser firms in question. Provider firms will not be able to advance finance to advisers out of their own funds.”

Speaking at the PFS RDR conference last week, Cummings said it is unclear where the FSA will draw the line when defining what it means by a provider’s “own funds”. He gave the example of Lloyds Bank, which took over Clerical Medical and owns Scottish Widows, and also owns the Black Horse finance company.

Cummings said: “What does own funds mean? Lloyds banking group owns a company called Black Horse. Black Horse offers factoring services. Now is Black Horse Lloyds bank- ing group funds or provider funds? I would like to know the difference.”

An FSA spokesman would not comment on how it plans to distinguish between banking and provider funds.

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