The FSA is confident it will be able to impose an RDR ban on commission for all advisers, despite the latest draft of Mifid II focusing its commission ban only on independent advisers.
Money Marketing revealed in September that a leaked draft of the directive stated that independent advisers could not receive commission, with no mention made of other forms of advice. This was confirmed when the draft was published last month.
In order to secure a commission ban for all advisers, as proposed under the RDR, the FSA will need to gold-plate the directive, if this area of the directive is implemented as suggested in the draft.
But speaking at a conference yesterday, FSA director of conduct policy Sheila Nicoll said she was confident the directive would allow the regulator to go further than the rules prescribed by Europe.
Nicoll said: “We are pleased to note the similarities between the Mifid II legislative proposals and some of our RDR requirements. And importantly, we believe that our RDR rules are compatible with the Mifid proposals.
“So, while the Mifid II proposals provide for a ban on commission when firms describe their advice as ‘independent’, the draft directive does not prohibit regulators from going further.”
Regulatory experts have already expressed concerns that as Europe pushes for directives to be implemented on a maximum harmonisation basis, the UK will be left unable to set its own national provisions.
The Treasury has already indicated that it will be lobbying for the wording of the directive to be extended to cover all advisers. The next stage of the negotiation process is at the European Council of Ministers. At this stage the UK will have to contend with other member states’ interests where advisers do not have such a strong presence in the retail mass market, although some states are proposing similar commission bans to the FSA.
Separately Nicoll also discussed the move to the new regulatory framework under the Financial Conduct Authority and the Prudential Regulation Authority.
She said a key issue for the FCA will be tailoring its regulatory approach for different parts of the market.
Nicoll said: “What is right for pure ‘retail’ markets is not appropriate for entirely ‘wholesale’ ones – another way of putting it, as Hector Sants did earlier in the year, is that a distinction can and needs to be made between ‘investor protection’ and ‘consumer protection’. The complexity in particular arises where, for example, products that start off in the wholesale market can and do find themselves in the retail market – recent developments in the Ucits market are a case in point.
“Getting this right will be a key challenge for the FCA, which needs wide debate since it underpins the success of London both as an international marketplace and as a mechanism for providing retail investors with access to a variety of financial products.”