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Non-compliant advisers win rule relaxation

IFAs with non-compliant PI cover will no longer have to tell their clients after the FSA relented to pressure from Aifa and advisers.

The change is effective from this week and means that IFAs unable to find cover or given permission by the FSA not to have compliant PI cover will no longer have to write to clients.

Aifa has been fighting for the change for some time, saying the only result of the rule has been a weakening of clients&#39 trust in their adviser. It says that PI is not indicative of an IFA&#39s ability but consumers could misinterpret the information.

FSA spokeswoman Louise Buckley says: “With immediate effect, firms will not have to disclose to clients that they have received individual guidance over PI. We have decided to drop that requirement after listening to the concerns of the industry.”

Aifa director general Paul Smee says: “I am delighted. The rule was inappropriate because PI is to do with financial strength, not competence of an adviser. I think it will make a difference to firms struggling in the current climate.”

The FSA says since September 2002 around 600 firms have been operating with non-compliant cover.

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