FCA defends rebate ban amid claims over overseas assets

The Financial Conduct Authority has defended its move to ban all rebates and commission payments made to platforms, despite feedback from operators and fund groups that it might be detremental to clients holding overseas assets.

In a feedback paper following a change to the definition of a platform to include any firm “arranging and safeguarding and administering investments”, the regulator cited one respondent’s comment that a wider definition would restrict the types of assets which UK wealth managers providing execution-only services with custody can hold.

Specifically, the respondent said, they would not be able to hold international assets where there is no clean share class. This may affect international customers with portfolios coming into the UK and could mean customers could not hold all their assets with a single manager, it added.

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However, the regulator retorted that because the rebate ban only applies to cash and not unit rebates, payments in the form of units or de minimis payments could still be made by providers and that this would prevent any negative effects.

The FCA said: “So wealth managers will still be able to hold international assets where there is no clean share class, but will need to pass on the payments to clients in the form of additional units or small cash rebates.”

The regulator added it is continuing to evaluate the case for imposing a blanket ban on commission in other product areas, including execution-only services and self-invested personal pensions.

Five organisations responded to the call for feedback including the Association of Independent Discount and Non-Advisory Brokers, Cofunds, Fidelity International, International Financial Data Services, UBS Wealth Management.