The FSA has published its guidelines for a simplified, less prescriptive version of the suitability letter as part of its final disclosure measures for the new conduct of business sourcebook.
The FSA says the document, branded the suitability report, must set out the client’s demands and needs, explain why the firm has concluded the recommended transaction is suitable for the client and include an explanation of any possible disadvantages of the transaction for the client.
The regulator also clarified other requirements that have been retained as consistent with the objectives of Mifid- in the aftermath of the FSA’s recent decision to move menu and IDD from rules to guidance.
These include the requirements for an adviser to be called independent, the simplified prospectus or key facts document and disclosure of how much commission or commission equivalent they are paying.
FSA head of retail investment policy Andrew Sykes says: “These measures allow us to retain a number of important safeguards for consumers. We are only retaining measures where we have been able to show that the benefits of doing so will outweigh the costs.”
Distribution Technology head of financial planning Simon Farrant says: “The cost to change menu and IDD documentation and the fact they remain as guidance may be sufficient to keep firms using the existing documents for now.”