The Financial Conduct Authority has decided against applying Mifid II’s remuneration rules across the whole of the sector.
Its decision means the rules will only apply to businesses regulated by Mifid II itself, which is due to come into effect in January 2018.
Last year the FCA asked the industry whether remuneration standards for sales staff and advisers should be extended across to non-Mifid II businesses, for example by introducing a crosscutting set of standards on sales staff remuneration.
There was a mixed response from the industry, with some claiming it would create a consistent regime while others said it would be best to wait for other European initiatives to be completed to find out their impact.
The FCA has agreed with the latter opinion and decided to wait.
In its latest consultation paper, published today, the FCA said: “We have not extended the Mifid II remuneration requirements more broadly at this stage, as there are several European initiatives under development that will (or are expected to) specifically address remuneration for particular markets, financial products and types of firms, including Solvency II, Insurance Distribution Directive, Mortgage Credit Directive and Capital Requirements Directive.
“Accordingly, we consider that introducing a broader set of sales staff remuneration provisions at this point would be premature, as it would risk conflicting with other guidance being developed at the European level.”
The consultation paper also covered issues such as supervision and complaint handling.
On the former it proposed that the FCA’s rules be changed to make it clear that firms need to notify the regulator of a breach of directly applicable regulations under Mifid II or implementing regulations introduced by the Treasury.
While on the latter it proposed expanding the jurisdiction of the Financial Ombudsman Service to cover complaints about advice on or sales of structured deposits where such services are provided by CRD credit institutions and investment firms authorised under Mifid and creating a new definition for ‘Mifid complaint’.
Andrew Bailey, chief executive of the FCA, said: “Mifid II contains important measures to enhance investor protection and bolster financial stability.
“It reflects recent themes of UK conduct regulation, such as improved controls on the manufacturing and distribution of financial products, and it implements the international commitments the UK entered into to reform derivatives markets following the financial crisis.
“As we said in our statement following the EU referendum, firms must continue to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect.”
Earlier this month Mr Bailey said Britain’s decision to leave the European Union will not lead to less European regulation.
He said it would not lead to “a bonfire of regulation” with the outcome depending on the agreement the government reaches with the EU.
The FCA said it will be publishing a third consultation on Mifid II, which will cover issues such as product governance rules, which is likely to be in late September or early October.