Regulation  

Permitted cash rebates to retail clients

Cash rebates can continue on investments already held by a consumer on a platform when rules banning cash rebates come into force in April 2014 and April 2016 for new and legacy business respectively, the FCA has clarified.

From 6 April 2014, cash rebates for new business (other than nominal amounts permitted) will only be possible for execution-only business held off-platform as:

• providers are banned from structuring their retail investment products to allow for cash rebates where a personal recommendation is provided to the retail client; and

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• platforms are banned from arranging for a retail client to buy a product with cash rebates for both advised and execution-only business.

But providers can pay cash rebates to retail clients if:

1) No change is made to the client’s investment in the relevant product or to the level of the retail client’s regular contributions into that product

2) The client’s investment in, or regular contribution to, the relevant product is reduced; the retail investment product provider may continue to pay the cash rebate associated with the reduced investment amount

3) The client’s investment in the relevant product is transferred from accumulation units to income units or vice versa

4) Part of the client’s investment is switched between funds within a retail investment product such as a Sipp or a retail investment product wrapper such as an individual savings account (Isa); the retail investment product provider may continue to pay the cash rebate associated with the part of the client’s investment which has not been switched into another fund.

5) The product is re-registered to another platform service provider and is otherwise unchanged

6) The product is converted to a share class which does not pay a commission, remuneration or benefit of any kind to a firm and is otherwise unchanged

http://www.fca.org.uk/your-fca/documents/consultation-papers/cp13-09