The FCA has come under fresh fire over its failure to publish its review into inducements and conflicts of interest – amid suggestions the regulator was “deeply disappointed” with the review’s findings.
Investment Adviser revealed late last year that the watchdog had postponed publication of the results of the thematic review, saying it would instead include them in its upcoming Mifid II consultation paper.
The decision took on a different context at the end of December when it was revealed the FCA had shelved a review of banking culture – leading to suggestions the regulator was ‘easing off’ the industry.
Now one industry source has claimed the official reason for the watchdog’s latest postponement of the inducements paper is “implausible”.
“The whole point of the thematic review is that it is a kind of report card, looking at how the industry is progressing and what is currently going on, rather than any kind of forward-looking statements,” said the regulatory consultant, who asked not to be named.
Gina Miller, co-founder of SCM Private, said: “It is almost as though [the FCA is] not sure which way to turn. Mifid II is on the horizon anyway, so I do not see why it cannot try to get ahead of that.”
The FCA said last year it had given guidance to the firms assessed as part of its study, but the consultant said the findings should have triggered a public response.
The consultant added: “We were expecting the report to be published. I think the FCA was deeply disappointed with the review – I have heard that the industry did very badly. The point of the regulator publishing documents is… as an incentive for firms to up their game.”
Among the issues understood to have concerned the watchdog was continued evidence of product providers subsidising costs for other firms in the investment chain, particularly in relation to marketing practices.
The FCA told firms at the launch of its review last March that it was seeking to stamp out such practices, saying they were tantamount to a circumvention of RDR rules.
In its feedback to firms investigated as part of the review, the FCA is thought to have re-emphasised a no-tolerance stance on inducements, of particular relevance given Mifid II’s requirements in this area.
A senior executive whose firm was part of the thematic review sample said the regulator had repeatedly asserted that corporate hospitality involving trips to either sporting or cultural events was no longer allowed under any circumstances.
The regulator last published a paper on conflicts of interest and inducements in January 2014, heralding an initial crackdown on provider payments and inducements.
A perceived lack of clarity in certain areas led to unsuccessful calls for the watchdog to provide details, and the Investment Association published its own guidelines for members at the end of that year.
