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FCA consults on allowing legacy cash rebates to continue

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Platforms have criticised the FCA for creating further market confusion and delaying their development plans by announcing a new consultation on platform legacy cash rebates.

The FCA last week confirmed it is to consult on draft guidance in September which will set out the regulator’s intention to allow cash rebates to continue on legacy business “indefinitely” where there is no change made to the investment, after the ban on cash rebates for new business comes into force in April 2014.

The regulator’s platform policy statement, published in April, confirmed a ban on cash rebates above £1 on new business from April 2014 while unit rebates were allowed to continue but with a tax charge applied. It also banned all legacy payments between fund managers and platforms from April 2016 but did not stipulate whether it would ban cash rebates to clients on legacy business.

Transact managing director Ian Taylor says the uncertainty means the development of systems, which need to be ready in less than a year, has to be put on ice until the matter is settled. 

Skandia platform marketing manager Mike Barrett says: “The continued uncertainty over cash rebates creates confusion and risk for advisers. Given advisers’ increased responsibilities with regard to platform due diligence as a result of new rules, they require certainty now as to what is permitted post-April 2014 and they need the full detail on the new business propositions of impacted platforms.”

Avalon Investment Services director Harry Kerr says: “There is confusion there because this should have been wrapped up and clarified in the policy statement. The rebate issues seem to be never-ending.”

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