Speaking at an event this morning (30 June) organised by the Tax Incentivised Savings Association, Stephen Hanks, the FCA’s Mifid co-ordinator in the markets policy department, said the regulator had simply lost the debate on keeping recordings of conversations where product recommendations are made.
Under Mifid II, the rules, which are currently up for industry discussion, state that telephone conversations of certain transactions including those that relate to product recommendations and those that are intended to result in a transaction must be recorded.
The FCA’s paper said this requirement “does not exist in our current domestic framework for those Article 3 firms that are retail IFAs and boutique corporate broking firms”.
This requirement was also objected to by the Association of Professional Financial Advisers.
Mr Hanks said: “Anyone caught by Mifid will be subject to these fixed rules, whereby five years of recordings must be kept.”
He added that the regulator argued that six months of recordings would be satisfactory “but very few other member states were on board”.
Mr Hanks also warned that the industry needs to start thinking about changes that need to be made for Mifid, even though they do not yet have all the facts.
He laid out the timetable as it stands, with the Treasury’s consultation having closed, legislation is expected to be presented to parliament next year. This will follow an FCA consultation in December this year, incorporating consideration of responses to the recent discussion paper on implementation of the EU regulations.
A policy statement is then expected by 3 July 2016, setting out finalised rules for how Mifid will be transposed into the UK. The date for implementation across Europe is set for 3 January 2017, although Mr Hanks admitted that given the European Commission’s track record, this could still be pushed back between now and then.
“People in the industry need to recognise that this isn’t just awkward legislation being dropped on us by Europe, Mifid II chimes in with what we’re trying to do as a regulator and how you should be treating clients.”
Getting into some of the various contentious points raised by Tisa and other industry bodies, Mr Hanks said that legacy commission payments had been discussed recently by the various EU member states, with the start of 2017 date being considered “year zero” for payments, with everyone having to comply with the new rules.
“We will have to keep an eye on transposition, but don’t expect clarity until September due to ongoing negotiations; we need to establish what’s happening at the EU level.”
On the new definition of independence for advisers, Mr Hanks said that they were still seeking to understand the Mifid standard, while on product disclosure the FCA is looking into proposals for a standardised regime across the UK; although he added this would be “challenging”.
He concluded by explaining to delegates that until things become more definite next year, the industry will have to concentrate on issues where the FCA does have discretion, while in other areas they will have to copy out from the EU.
“We will try to be as helpful as we possibly can, but there’s a limit to the guidance we can currently provide,” added Mr Hanks.
peter.walker@ft.com
