20.09.2016 - TREASURY CONSULTATION ON THE DEFINITION OF FINANCIAL ADVICE
HM Treasury has published a consultation paper on amending the current definition of “advising on investments”.
This was trailed in the financial advice market review (FAMR) which reported in March this year. The FAMR focussed on the so-called “advice gap” where consumers are either unable or unwilling to pay for financial advice.
It concluded that there was a clear need for more innovative and cost-effective ways of delivering high quality advice and guidance. But FAMR found that firms were reluctant to provide low cost guidance (short of full blown advice) for fear that this might amount to the regulated activity of advising on investments.
FAMR therefore recommended (among other things) that the government should consult on amending the definition of regulated advice in Article 53 of the existing Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO), to bring it in line with the EU definition set out in the Markets in Financial Instruments Directive (MiFID). This would mean that only advice which made a personal recommendation would be regulated.
The Treasury’s paper proposes the following headline definition:
“Advising a person is a [regulated] activity if the advice is a personal recommendation”.
It then goes on to state what a personal recommendation is - (in summary) given to a person in their capacity as an investor; concerning buying selling or exercising rights in relation to an investment; and presented as suitable for the person.
This does mean that firms whose activities fall outside the new definition because they only offer guidance and avoid making recommendations will not need to be regulated, and the Treasury paper notes that “There is a small risk that unscrupulous firms may attempt to use guidance services to distribute products, without being subject to regulation”.
The consultation is open until 15 November.
30.09.2016 - UCITS V DISCLOSURE DEADLINE
Operators of UCITS funds are reminded that Friday 30 September is the final deadline for including in prospectuses certain disclosures in order to comply with UCITS V. The disclosures relate to depositaries and remuneration policy. COLL 4.2.5 (8) (f) (g) and (h), and 4.2.5 (28) provide the detail.