FSA to take ‘robust action’ against commission workarounds
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The FSA has written to product providers and advisers promising to “take robust action” against companies which seek to “work around” the commission ban.
Advisers will no longer be able to receive commission on new business from December 31 as part of the FSA’s RDR clampdown.
In a letter sent to the chief executives of 24 providers and advisers, Nick Poyntz-Wright, head of the FSA’s life insurance department within the conduct business unit, said some firms may be “soliciting or providing payments that do not look like traditional commission, but are generally intended to achieve the same outcome”.
“Clearly such arrangements are not in the spirit of the RDR,” he said.
“We are concerned that non-commission payments and benefits (typically included within ‘distribution agreements’ between provider and distributor firms) may be indicative of firms seeking alternative ways of preserving features of the market that the RDR intends to eradicate.”
The FSA has requested information from the recipients of the letter as to any distribution deals they have in place or are negotiating, in order to assess their compliance with the RDR.
In a statement on its website, the FSA added: “We will be challenging firms who are pursuing these deals and arrangements and we will take robust action where we see evidence that they are circumventing the rules.
“This is not about banning arrangements which are reasonable and comply with our rules; it’s about cracking down on those firms that are seeking to get an unfair advantage over others.”