The FCA has admitted it must widen the information it demands about advisers as the current data it collects is limited and could allow some dodgy dealers to “fall under the radar.”
Reporting rules that took effect on 31 December 2012 require advisory firms to provide the FCA with information on complaints about matters relating to the retail investment activities carried out by its retail investment advisers.
The rules required a regular, six-monthly complaints report (including nil returns), and an ongoing notification that is triggered in the event an adviser is subject to three upheld complaints within 12 months or to one complaint paying more than £50,000 redress.
Now the FCA plans to add to these rules and capture complaints relating to all activities carried out as a retail investment adviser - not just activities covered by the Retail Distribution Review.
In practice, the FCA admitted certain activities, such as advising on securities and/or derivatives that are not classified as retail investments are not captured by the current set of reporting rules.
In addition the term ‘retail investment activities’ stated in the current reporting requirements does not include two aspects of the definition of retail investment products, introduced as part of the RDR rules.
According to the FCA adjusting the rules to refer to activities carried out when acting as a retail investment adviser will align the scope of all the RDR professionalism rules to the same individuals and the activities they carry out.
The FCA stated this will ensure that advisers are subject to the same standards and scrutiny – for example, if they advise on collective investment schemes or on shares or derivatives.
If the proposed adjustment is not made, the FCA argued there was a chance that poor quality advisers that specialise in shares or derivatives (for example) could fall under the radar and the clients of these advisers could suffer.
The FCA stated: “Advice on shares and derivatives is an area of concern for us in terms of advice suitability and we have taken enforcement action in this area in the past. We have published a number of final notices against firms, including specific cases of poor advice for penny shares and contracts for differences.”
If the adjustments to the reporting rules proposed are given the go-ahead the changes will come into force in early 2014.