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European parliament wants Mifid commission ban scrapped

The European parliament wants a proposed ban on commission being paid to independent advisers across the European Union to be scrapped.

The European Commission proposals for Mifid II, published in October, would ban commission for advisers operating on an “independent” basis. In its response to the Commission’s plan, the parliament proposes an amendment so all advisers simply have to disclose any commission.

The Commission’s original proposals raised concerns in the UK from the Treasury and the industry that the directive would have to be gold-plated by the UK to extend the ban on commission to restricted advisers in line with the retail distribution review. An EC official is reported to have said this would be possible.

If the amendment is accepted and becomes part of the directive, analysts suggest the UK would need a carve out to ensure regulations banning commission through the RDR could continue.

The FSA says it is confident it will have discretion to continue its commission ban whatever the outcome of the directive. An FSA spokeswoman says: “While Mifid is often described as ’maximum harmonising’, it is a directive, not a regulation – which means individual countries still have to write their own rules to implement it.”

As rapporteur, German MEP Markus Ferber is guiding the directive through the parliament. His final report includes the amendment.  He also thinks using the word ‘independent’ would undermine other types of advice.

It says: “He is not in favour of the proposed new obligation to specify whether the investment advice is independent and if it is based on a broad or a more restricted analysis of the market as restricting the use of the word “independent” may mean that other forms of advice have a negative connotation.”

Cicero Consulting Brussels analyst Tim Gieles says: “The FSA got a carve out on the first Mifid and would need a similar one for Mifid II.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 1st April 2012 at 5:35 pm

    Thus proving yet again that the FSA does whatever it wants regardless of what anyone else may think or say.

  2. So a directive is not a regulation and can be ignored then. Good to know these things.

  3. Only if the government actually ignores them instead of seeing them a a foundation to build more complex entities upon.

  4. Of course if a large majority in the UK had voted UKIP, just to kick up some dust for a couple of years, and shake up the existing political system, we would no longer have to worry what Brussels thinks or does, and we would be once again in charge of our own destiny in this country.

    Furthermore, the FSA would have been forced to be accountable, and RDR would never have got off the ground. There is absolutely nothing wrong with the existing model of commission or fees, or a combination, as long as full disclosure is made and has the client’s full agreement from the outset.

    People complain about the government, over-regulation of our industry (and many others), the nanny state, etc. but at the end of the day we get the government we deserve. We vote for them! (doh!)

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