The FSA is drawing up contingency plans in case the European Commission rejects its request to retain the payment menu and initial disclosure document under Mifid.
Sources suggest that European Commissioner for the internal market and services Charlie McCreevy is unhappy with the article 4 justifications put forward by the FSA to retain the menu and IDD as extras to the directive and speculation is mounting that he may veto them.
The FSA and EC are in high-level discussions over the matter, with a decision expected in the next month. The directive comes into force in November.
At a recent speech in London, McCreevy warned that too many additional requirements risked undermining the directive and turning it into a “real practical nightmare”.
The FSA is understood to be investigating a plan B scenario such as watering down the current disclosure requirements to make them acceptable to the EC in the event that it rejects the exemptions.
If the menu and IDD are rejected, there is likely to be further consultation between the FSA and the EC and a potential mini-consultation with the industry to change the regime in time for the November deadline. The FSA also included in its list of article 4 exemptions the need for adviser labels such as IFA and multi-tie although it believes these are probably in line with Mifid.
At a recent conference, FSA chief executive John Tiner warned of potential conflicts from the EC having different objectives compared with regulators such as achieving a single market.
The FSA argues that due to the unique nature of retail financial services in the UK, these add-ons are needed.
Spokesman Robin Gordon-Walker says: “We are in discussions with the European Commission at the moment about the article 4 justifications, including retaining the menu and IDD. The issue has not yet been resolved.”