While no major reforms to financial regulation are likely after the UK's departure from the European Union, the Financial Conduct Authority may make changes to its disclosure requirements, Rory Percival has suggested.
The regulator has previously ruled out a "bonfire of regulations" after Brexit, warning it would not be in the best interests of companies in the financial services sector and emphasising that many standards were now set globally.
Mr Percival, the regulator's former technical specialist, said he expected the FCA to be "very mindful" of any potential negative impact of differences in UK regulation compared with the rest of the EU.
As a result, Mr Percival said he was "convinced" there would be an additional step in the policy making process post-Brexit which involves an analysis of how UK and EU regulatory differences might impact the market.
He said: "If the regulator wants to change a rule, they will have to consider if there are any negatives given we will now have a different set of rules in the UK than the EU and if anyone is getting an unfair advantage.
"As a consequence it's unlikely we'll see any particularly significant divergence from the EU regulations we have now and in the future.
"I'm sure when the EU brings in new regulations, the FCA will be keeping tabs on that."
But Mr Percival said although no major changes were anticipated, he did expect there would be plenty of regulatory "tweaking" after Brexit - including the potential for changes to the FCA's disclosure requirements.
He said: "Disclosures, particularly product disclosure, are quite extensive and in some respects don't work particularly well in the UK.
"Perhaps it is optimistic but I do anticipate in years to come the FCA will wind back significantly on the nature of disclosure requirements."
Mr Percival said this would be change in a "positive area" for advisers.
The regulator has introduced a string of disclosure rules in recent years, aimed at improving consumer understanding of cost and charges and increasing transparency in the market.
Most recently the implementation of European regulation Mifid II in January 2018 which now requires the actual costs and charges associated with client investments to be disclosed.
Mr Percival said: "The are fundamental differences in the way the UK market works which means disclosure does not work very well here.
"Specifically on the continent a large part of advice is bank based or vertically integrated firms, they’ll sell one product to a client and product disclosure will be around an individual product.
"In the UK there is a much broader and holistic approach taken by advisers, not just selling one product on one platform but instead having a whole collection of product information."
Mr Percival said especially in the case of advisers putting together a portfolio of products for clients, there is a large amount of paperwork with information for numerous products which can fail to tell clients what they most want to know - what it all means together as a portfolio.
He added: "I suspect the FCA is more sceptical about the benefits of disclosure than the rest of the EU, perhaps there has been an over emphasis on disclosure."
The FCA did not comment on Mr Percival's suggestion.
Alistair Wilson, head of retail platform strategy at Zurich, told FTAdviser he was working on the assumption Mifid rules will stay in force after Brexit.
But he said: "The FCA might revisit Mifid and change some of the nuances, how could they align the information better across the industry."
He said the the FCA had stated in its retirement outcomes report it was thinking to introduce similar disclosure rules on drawdown, which might trigger some alignment.
He added: "The FCA is doing a lot more reflective work, looking at what the market is already doing. They are doing that more than ever which is encouraging."
Alistair Cunningham, financial planning director at Wingate Financial Planning, said: "My impression, maybe erroneously, is that much of the EU-led disclosure has its origins in the UK.
"It would be unfortunate if the UK leaving the EU meant winding back the last few years of improved disclosure, as whilst bedding in the likes of Mifid II has been a challenge, it is certainly in the long-term best interests of Financial Services to take a more transparent approach."
rachel.addison@ft.com
