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Providers are warned over buying stakes in IFA firms

The FSA has issued a veiled warning to providers that they should not anticipate multi-ties by taking a financial stake in IFA firms as the better than best rules still apply.

Head of conduct of business policy David Severn said the FSA is looking at the rules, which come into effect any time a provider takes more than 20 per cent in an IFA firm.

The man who is leading the FSA polarisation review said if providers were to start investing heavily in IFAs, then, effectively, multi-ties are created, which are prohibited under the distribution arrangements.

Severn refused to confirm whether the FSA had had applications for a waiver of the rules governing this area but he said any waivers would have to be examined closely to see how they fit in with the overall direction of the regulator.

He said the FSA recognises there is a problem of under-capitalisation of IFA firms but did not think providers taking equity in them was the answer.

Severn said the regulator was reviewing the situation.

He said: “One of the big barriers to IFAs is the suspicion they will be influenced by commission. It must be asked if providers take larger and larger stakes in IFA firms, what does it do to the independence of IFA firms – they effectively become multi-ties.”


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