RegulationOct 12 2015

FCA shelves publication of inducements review

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FCA shelves publication of inducements review

The FCA has said its forthcoming work on the Markets in Financial Instruments Directive (Mifid) II means it will not publish the findings from a thematic review into inducements and conflicts of interest.

The study, which concluded at the end of September, marked the next step in the regulator’s work in the space, following on from the January 2014 finalised guidance that had caused unease among providers and advisers.

The latest review from the regulator will now be incorporated into the Mifid II proposals on the same subject in late 2015.

The FCA contacted 23 providers and advisers this summer for its thematic review.

All those contacted have now been given feedback letters, but a formal, public report will not be issued.

The regulator said: “We will not be publishing a thematic report.

“As we highlighted in discussion paper DP15/3, Mifid II will address inducements standards for independent advisers, and we will use this opportunity to consider more widely the impact on our domestic inducements regime for advisory firms.”

The Investment Management Association – as it was known then – responded to the 2014 guidance by unsuccessfully calling for the FCA to provide specific examples of how it intended to crack down in areas such as training, hospitality and gifts.

As a result, many in the industry have adapted to the new rules by erring on the side of caution.

As well as hospitality issues, the FCA’s initial work in 2013-14 into inducements saw it criticise practices such as agreements that could lead advisory firms to channel business to particular providers.

The regulator said in its March 2015 Mifid II discussion paper that it anticipated the European rules would “tighten standards domestically”, adding that the scope should extend to restricted as well as independent advisers.

Mifid II is also set to ban the receipt and retention of all monetary and non-monetary benefits from third parties.

The FCA added that acceptable “minor non-monetary benefits” might be restricted to generic information relating to a product or service, participation in relevant conferences, seminars and other training event, and hospitality of a reasonable de minimis value – such as food and drink during a business meeting.

Commenting further last week on its latest review of inducements, the FCA said: “We are planning to issue a consultation paper on Mifid II implementation in due course and the results of this [inducements] review will inform that paper.”

The regulator may end up issuing two consultation papers on Mifid II – one in December with another to follow next year – because of potential delays to parts of European regulators’ legislative timetable.