Regulation 

Inducements, the final frontier

Hospitality is not a dirty word yet the FCA currently seems to be intent on making it one.

In response to its 2015 thematic review on inducements, the regulator has warned that financial advisers who accept invitations to sporting events, concerts or social events from product providers may be breaking conflict of interest rules.

It reckons those accepting invitations for events that “did not appear capable of enhancing the quality of service to clients”, were, “not conducive to business discussions” and any dialogue with advisers, “could better take place without these activities”.

I have not been an adviser for over 10 years, but there are a number of factors that trouble me with this latest ‘guidance’.

Financial services firms provide significant support for big ticket events in the sporting world and beyond, regularly inviting people from across the value chain as part of this.

Take, for example, the mix of journalists, customers and suppliers who attend the Aegon Championships each year. These tickets are automatically included as part of the overall price of the sponsorship package but, in reality, if the firm is unable to allocate them as they see fit then the tickets will quite simply go to waste.

Moreover, many financial services companies are committed to supporting an event for years but if FCA rules mean many of the people who carry out business with the sponsor are no longer able to attend, then part of that sponsorship value has arguably been diluted.

Yet the money paid cannot be refunded to reflect that fact. Not just a deterrent for sponsors, this also has the potential to damage some sporting events in particular, as many would simply not survive without the support provided by the financial services sector.

If hospitality is becoming a no-go area for advisers, it may also be worth reflecting again on the hospitality and gifts that have been lavished upon the Chairman and Executive Members of the FCA.

In the interest of fairness, it should be acknowledged current FCA rules state any gift with a value of £30 or more must be declared and surrendered so it can be used within the FCA or charitably disposed of.

Records from April 2013 onwards show gifts and hospitality summaries, including items such as an Aspinall black leather document case, private art exhibition viewings and, perhaps the most unusual, a glass box containing a silver ship from the Indonesian Financial Services Authority – all without exact costs detailed.

There are also enough lunches and dinners to drastically reduce the grocery and wine bills of many senior figures of the FA. Surely all of this raises the question of whether the FCA’s own rule should apply here, that any vital dialogue with the above, “could better take place without these activities”?

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