FCA finalises inducements guidance: FCA has published its finalised guidance on inducements for product providers and advisers. FCA had been concerned that, even following implementation of the Retail Distribution Review (RDR), some payments were still being made in a way that could have the effect of making advisers favour a particular product provider. Since FCA started consulting on its guidance, it has become aware of practices which indicated that some payments to advisory firms seemed to be linked to securing sales of a provider's products or potentially incentivised firms to promote particular products to their advisers. It also found evidence of joint ventures between providers and advisers that gave rise to potential conflicts of interest. Key points of the guidance include:

  • a firm that wants to avoid the risk of a payment between providers and advisers breaching RDR principles should not make or receive any payment;
  • firms must consider both actual and potential conflicts when assessing whether a payment is acceptable;
  • the basic principle is that firms must remove any risk that they may put their interests ahead of those of their customers, and advisers must ensure that accepting a payment will not impair their duty to act in the best interests of their customers;
  • except where permitted in FCA rules, payments from providers to advisory firms should be based on reasonable reimbursement for the costs incurred by the advisory firms;
  • any payment should enhance the quality of services to customers;
  • inclusion of a provider on an advisory firm's panel must not be influenced by the provider's willingness and ability to buy services from or provide benefits to the firm;
  • terms in service and distribution agreements should not influence personal recommendations. FCA gives examples of terms it thinks could create unmanageable conflicts;
  • firms must comply with FCA's disclosure requirements;
  • firms must ensure that providers give help to firms (whether in cash or otherwise) to develop IT necessary to operate the provider's software only where it will generate equivalent costs savings to itself or clients;
  • training and participation in conferences and seminars must be provided only on a fair basis;
  • providers may give and advisory firms may accept gifts and hospitality only of a reasonable value;
  • providers may assist advisory firms with promotional activity only where it will enhance the quality of service to clients.

The guidance includes several examples of good and poor practice, including examples of where distribution agreements demonstrate firms have in place good systems and controls. FCA now expects firms to review their agreements and make necessary changes within the next three months. (Source:FCA Finalises Inducements Guidance)

FCA confirms skilled persons appointment: FCA has confirmed it has appointed a skilled person to conduct an independent report on RBS' treatment of customers in financial difficulty. It notes that, while commercial lending falls outside the Financial Services and Markets Act, if the review reveals issues within FCA's remit, it will consider what measures it should take. It expects to report on the findings in the third quarter of 2014. (Source: FCA Confirms Skilled Persons Appointment)

FCA updates on AIFMD: FCA has updated its Alternative Investment Fund Managers Directive (AIFMD) pages on its website to include some additional FAQs for depositaries. (Source: FCA Updates on AIFMD)

FCA consults on FSCS management levy: FCA and PRA are consulting on the management exposures levy limit for the Financial Services Compensation Scheme (FSCS) for 2014/15. The proposed levy is £80 million, of which a minimum of £74.7 million will be required with the remainder levied only on demand to meet key contingencies. The levy is less than that for the current financial year. Comments are due by 17 February. FSCS has also published its Plan and Budget 2014/15, in which it announces an annual levy of £313 million. The budget is accompanied by a document setting out FSCS's five year vision, which includes the modernisation of claims handling. (Source: FCA Consults on FSCS Management LevyPlan and Budget 2014/15 and Vision for a Confident Future)

FCA updates on consumer credit rebates: FCA has added to its website a facility for firms to register to the rebate scheme that applies to consumer credit licences. (Source: FCA Updates on Consumer Credit Rebates)