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FSA can’t fend off Mifid onslaught

European Commission rebuffs bid to minimise directive impact on IFAs

Aifa is warning that the FSA is powerless to save IFAs from the full impact of the European Union’s Mifid directive which could swamp advisers with spiralling admin costs and requirements to tape calls to clients.

It says the regulator’s bid to minimise the directive’s impact on UK firms has been dealt a hammer blow by EC commissioner for internal markets and services Charlie McCreevy’s announcement that it would implement measures as regulation rather than as a directive.

Aifa policy officer Vera Cottrell says the FSA’s attempt to prevent gold-plating represents “a maximum harmonisation” approach to regulation which removes the ability of EU member states to interpret the markets in financial instruments directive.

Most regulated firms carrying out investment business will be affected by the directive and could have to make substantial changes to the way they operate.

Cottrell believes the EC’s uncompromising approach could scupper any attempt by the FSA to keep costs down, even prompting the reintroduction of a rule forcing firms to tape phone calls with clients, which had been removed from the original proposals.

The news could increase tension between European power brokers and the Treasury and the FSA, with FSA chairman Callum McCarthy openly critical of the EU’s failure to conduct a cost-benefit analysis before issuing the directive.

Cottrell says: “Despite their promises, the FSA and the Treasury are powerless to prevent IFAs from increased admin costs.”

Cardif Pinnacle deputy head of risk Keith Martin says: “Unlike a directive, regulation is a direct law, so, neither our Government, nor the FSA, would have any say once the regulation was passed.”

FSA spokesman David Cliffe says: “We can only work with what we are given but we will try to minimise the disruption as far as we can.”

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