MEP and Economic and Monetary Affairs committee member Kay Swinburne says the UK “spectacularly failed” in its negotiations for a Europe-wide ban on commission, blaming the Labour party for a lack of support.
Speaking at a CityUK fringe event on financial services at the Conservative conference in Birmingham yesterday, Swinburne pointed out that foreign financial advisers working in the UK would still be able to receive commission in certain circumstances under Mifid II rules, despite the RDR.
Last month, the European Parliament backed proposals to allow member states to keep paying commission to financial advisers. There was concern the FSA would have to gain an opt-out to keep the RDR commission ban but the new rules allow the UK and other member states to go further than the EU rules.
If an adviser firm sets up a branch in the UK, under either Mifid or the Insurance Mediation Directive, the FSA’s conduct of business rules will still apply, including the RDR commission ban and rules on independence.
However,, if a firm passports into the UK without having a UK branch they are only subject to the rules set by their home state’s regime.
Mifid and the IMD passporting rules do not include all investment products. For example, personal pensions are not in scope so firms passporting into the UK who are seeking to provide pension advice will require a top-up permission, and therefore be subject to FSA rules.
Swinburne said: “Even though we have had the RDR to look at this type of issue for the UK it does not extend to non-British financial advisers who are operating in the UK so we need to protect our investors. Disclosure is only one step in that direction.
“We have just tried under Mifid II to get amendments through that would ban inducements. Inducements in a British context sounds a really bad thing as it sounds as though someone is being paid to act not in the interests of the client.
“We have spectacularly failed to get everybody across the political spectrum to accept that inducements should not be paid to financial intermediaries for your business. I can tell you that the British Labour party did not support the banning of inducements.”