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Take directive action

Cardiff Pinnacle’s Keith Martin urges IFAs to start lobbying Brussels instead of complaining about the FSA

When I recently mentioned to a colleague that the European Commission was taking action against 10 countries for failing to properly implement the Insurance Mediation Directive, I was not surprised by his response: “Why does the UK bother following these rules and incurring the costs when other countries don’t? Who wants to be in a race where the first across the line is the one that is disadvantaged?”

The UK Government did the right thing by implementing the IMD on time. The European Commission will no doubt soon bring other countries into line. However, I am certain that the impact of the IMD in each country will not be uniform.

If you have got all the business you can handle on your own doorstep, you are prob- ably not bothered but if you like the idea of selling to some of the 400 million EU citizens outside the UK or you do not want intermediaries from other countries selling to your clients, perhaps you are concerned. After all, we should not lose sight of the IMD’s purpose – to remove barriers preventing intermediaries from selling to consumers in countries other than their own.

So, if France’s post-implementation version is easier and cheaper for intermediaries to work within than our own, then one might argue that there is prima facie evidence that French IFAs have a competitive advantage over our IFAs in the UK.

The source of these differences is mainly down to how each country implements the directive. Some directives do not allow states to introduce rules that go further than the directive’s content while others may have some or no such restrictions.

The IMD had no restrictions. The UK Government amended secondary legislation, giving the FSA the authority to police insurance selling.

The FSA then had to do two things – write rules encomp- assing the IMD’s provisions and meet its regulatory object- ives, as laid down by Parliament in the Financial Services & Markets Act 2000.

This led to the inevitable complaints about gold-plating. Far be it from me to def- end the FSA, but it did find itself between a rock and a hard place. Implementing the IMD but not following its own stat- utory objectives would have displeased Westminster. Ignoring the IMD would have upset Brussels. This was a clash of domestic and European law and the result is ICOB and the other changes to the handbook that the FSA has deemed necessary. Other countries will be faced with the same issue but the outcome will not be exactly the same as here.

The important issue is whe-ther or not UK IFAs have a level playing field with their overseas peers and we probably will not know that until all 25 countries have fully implemented the IMD.

This Brussels-Westminster law mixture is likely to be repeated in other areas of interest to the IFA sector. As the FSA regulates most, if not all, the products that the commission is concerned with, any decisions made at Canary Wharf should get your attention – assuming the commission introduces a new directive or amends an existing one.

Responses to a European Commission Green Paper on asset management are winging their way to Brussels. The commission is mulling over what changes may be needed to the investment fund sector to make the market work more effectively. If you sell investments, this will be of interest to you. If you sell mortgages, then the Mortgage Credit Green Paper is right up your street. If insurance premium rates are your concern then you had better watch out for Solvency II.

These will eventually find their way into UK law, most likely accompanied by moans about gold-plating. But are we missing the point? Instead of complaining, shouldn’t we be lobbying?

As directives first see the light of day in Brussels, that seems the sensible place to start. After all, why criticise the FSA for putting laws into practice that the politicians in the European Parliament have created?

In my admittedly limited experience, I have found that our politicians in Brussels are very willing to represent the country’s interests when it comes to voting on and amending the texts of prospective directives. It is up to us to spot directives while they are in their formative stage, such as the asset management and mortgage credit examples above. It is also our role, not just to say what we do not like but also to explain why and suggest an alternative. In reality, it is a bit more compli- cated than that but the prin- ciple holds good.

It is up to us to help ourselves on EU law matters. What works best – complaining about gold-plating or getting our politicians to represent our views in Brussels?

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