The FCA is to consult on draft guidance regarding the treatment of cash rebates for legacy business following industry queries in the wake of the regulator’s platform policy statement.
A note sent to trade bodies today confirms the draft guidance, due in September, will set out the regulator’s intention to allow cash rebates to continue on legacy business “indefinitely” where there is no change made to the investment after the ban on cash rebates for new business comes into force in April 2014.
The regulator’s platform policy statement, published in April, confirmed a ban on cash rebates above £1 on new business from April 2014 while unit rebates were allowed to continue but with a tax charge applied.
It also banned all legacy payments between fund managers and platforms from April 2016 but did not stipulate whether it would ban cash rebates to clients on legacy business.
The note says: “In view of the queries we have received, we have concluded that it would be helpful to add guidance on the treatment of legacy business in relation to cash rebates to retail clients, and intend to consult on draft guidance in the September Quarterly Consultation Paper (which will be published in early September).
“The new guidance will set out in more detail our policy intention, which is that cash rebates to retail clients on legacy business can continue indefinitely, unless a change to the legacy investment on or after 6 April 2014 (such as a fund switch involving the sale of all or part of the investment and purchase of different funds) requires the investment or part of the investment to be placed in funds which do not allow for cash rebates (other than those permitted by COBS 6.1E.10R(2) and COBS 6.1E.11G).”