FSA guidance on legacy business “unclear and incomplete”, says IMA

The Investment Management Association has labelled proposed guidance on the treatment of legacy business as “unclear and incomplete”.

In its response to a consulation by the FSA on treatment of legacy business, the IMA claims that proposed guidance could lead to increased costs and less transparency for consumers.

The asset manager trade body says a lack of clarity remains on when commission “can and cannot be paid” for legacy business.

The IMA says guidance on which party is responsible for instructing commission to cease needs to be clarified and calls for a ‘sunset clause’ after which all commission payments will cease.

IMA senior adviser for retail distribution Andy Maysey says: “The FSA needs to do three things: provide practical examples of what is classed as legacy business to cover a number of common scenarios; make it clear where the responsibility lies to determine when commission can continue; and create a level playing-field across all products.

“To implement RDR effectively and in the interests of consumers, there should be no grey areas.”

He adds: “Furthermore, we urge the FSA not to veer too far from its initial proposals as many firms have already invested considerable time and money preparing on the basis of the FSA’s previous statements about the legacy book.

“Indeed, the FSA has been insisting for some time that firms should be well-advanced in their preparations.

“Any significant divergence from previous indications by the FSA about its approach will make implementation by 2013 unrealistic and add yet further costs.”