Aifa believes the FSA’s retail distribution review plans to ban certain types of adviser from receiving commission payments could be scuttled by the European Commission.
Director general Chris Cummings says he expects the FSA to face difficulties in getting the structural changes advocated in the RDR to be accepted by the EC under the markets in financial instruments directive.
He says Mifid creates freedom of services across the European Union and allows intermediaries to be paid by commission, without specifying type, so the FSA is likely to need Article 4 exceptions to drive through the policy.
He says through Mifid, the EC has already taken a view that commission does not lead to consumer detriment. Following the FSA’s failure to get these exemptions for the payment menu and initial disclosure documents, Cummings says that there are massive doubts as to whether the regulator would get its way as EC objectives potentially conflict with the RDR.
In one of his last speeches at the FSA, chief executive John Tiner warned: “The European Commission has objectives that differ from those of regulators.”
Cummings says the RDR follows a similar timetable to the EC’s green paper on retail financial services in the single market, with a final report published this autumn and conclusions still unknown.
Aifa has mapped out a three-stage RDR response programme starting by consulting members, engaging with consumers and conducting independent research. This will be followed by policy formation focusing on ben-efiting consumers and finally lobbying across the political and regulatory spectrum.
Cummings says: “We must ask the FSA again and again do you have the power? It is no longer the final arbiter. How do we know we are not going to waste a whole lot of time, effort and money and confuse consumers further to come up with proposals the EC will not allow because the commission is going in a very different direction?”
In the RDR paper, the FSA acknowledges that Mifid “may have the greatest potential impact on implementing the proposals”.
It also says: “We are fully prepared to make cases where necessary to achieve the outcomes of the review.” It also hopes primary advice will fall outside the Mifid scope, as basic advice does.
Cummings hits out at ABI, p5