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FSA says wraps can be regulated by principle

The FSA says the regulation of platforms will be principles based and their use is unlikely to result in a change to the Handbook.

The regulator, in its discussion paper 07/02 ‘Platforms: The role of wraps and fund supermarkets’, launched as part of the RDR, says it does not want to hamper the growth of the platform market, which it says “can be beneficial to consumers”.

The FSA is also encouraging the industry to work towards developing common terms to enhance both industry and consumer understanding of the different type of platform.

The paper says: “We believe a principle-based approach is likely to be particularly appropriate for platform providers and users, because the platform market is continuing to grow and change.”

At present, our Handbook does not contain any reference to offering
platforms, or the particular implications of using platforms when giving advice.”

The Platform Committee says: “We can see the attraction of platforms being covered by principles based regulation without the need for any additional specific rules.

“Principles-based regulation is preferable to prescriptive rules, provided that the responsibilities for best practice and treating customers fairly are observed equally along all parts of the distribution chain.”

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