FCA has published the key findings from its 2015 thematic review of the benefits provided and received by firms conducting business subject to the Markets in Financial Instruments Directive (MiFID), and those carrying out regulated activities in relation to a retail investment product. FCA has not published the full review, saying that, instead, it is incorporating the work in its consultation on the revised MiFID package (MiFID 2). It has published the key findings to remind firms of its current expectations. The major problems FCA found are:
- hospitality provided or received did not always appear to be designed to enhance the quality of service to the client;
- hospitality not designed to enhance the quality of service to clients was offered in connection with other benefits that do meet the requirements;
- hospitality logs did not always record relevant detail or were not well maintained;
- product providers were making payments to advisory firms in excess of the costs incurred by the advisory firm in arranging the training or other benefit provided; and
- MiFID firms were not providing clients with an indication of the value of allowable benefits provided, e.g. training.
FCA stresses that firms must consider each benefit separately to assess whether it is designed to enhance the quality of client service, firms must keep sufficient records to allow effective compliance monitoring and MiFID firms must ensure clients receive sufficient information to assess possible levels of inducements. (Source: FCA publishes findings on inducements and conflicts)