Mifid amendment calls for commission ban to be scrapped
If the European ban on independent adviser commission - originally added as a previous amendment to the second Markets in Financial Instruments Directive (Mifid II) - was scrapped, the FSA’s anti-commission stance would look increasingly isolated in Europe.
The FSA is continuing to insist that both independent and restricted advisers should be banned from receiving “inducements” under its Retail Distribution Review rules that come into force at the end of the year.
The draft proposals, seen by Investment Adviser, have been submitted by German MEP Markus Ferber, who is concerned over the Mifid II plans to restrict use of the term ‘independent’.
In a report to the European Commission, Mr Ferber said he wanted Mifid II clauses on independent advice, which include the commission ban, to be removed altogether.
“[I am] not in favour of the proposed new obligation to specify whether the investment advice is independent and if it is based on a broad or a more restricted analysis of the market as restricting the use of the word ‘independent’ may mean that other forms of advice have a negative connotation,” he said.
Peter Grimmett, head of fund regulatory development at M&G, said: “Mr Ferber has effectively pulled back on an inducement ban. This won’t change what the FSA is going to do as Mifid II won’t come in until 2016.”
In a speech to a British Bankers’ Association conference on Mifid in January, FSA acting director for markets David Lawton predicted that other national regulators in Europe may also be “interested in restricting inducements for all firms that give advice, while remaining in line with Mifid II”.
The FSA has long maintained that the development of Mifid will not affect the implementation of the RDR.
The FSA first contacted the European Commission two years ago to inform it of its intention to ban commission and received a “carve out” from some areas of the initial Mifid directive. This is expected to remain the case as Mifid II is implemented in stages over the next five years.
M&G’s Mr Grimmett added he “can’t imagine” the European Commission backtracking on its existing agreement with the FSA.
The European Federation of Financial Advisers and Financial Intermediaries (Fecif) last month wrote to the European commissioner for internal market and services Michel Barnier complaining about the European Commission’s “inflexible position” on commission.
Vincent Derudder, chairman of Fecif, called the proposed ban “obviously discriminatory and anti-democratic”.
Mr Ferber added that clients should be told by their adviser how regularly the suitability of products is assessed.
He also proposed an obligation for investment companies to specify a target market for all products when launched, in line with the FSA’s guidance for structured product providers.