FCA is consulting on rules to clarify its application of the Retail Distribution Review (RDR) rules to referrals to discretionary investment managers. The paper:
- clarifies what happens when an adviser recommends a client to place additional money with a discretionary investment manager from whom the adviser receives payments resulting from a referral made before RDR implementation. Following market consultation on commission for legacy business, FCA intends to allow referral payments for pre-RDR referrals to continue, but will ban payments for post-RDR top-ups when an adviser recommends more money be paid into investments already held with a manager;
- bans referral payments where an adviser does not provide personal recommendations to particular clients, but provides other services to them, such as market research. FCA already consulted on this, and most respondents supported it as they believe it would stop firms trying to circumvent the ban on referral payments. So referral payments can continue only where firms provide pure non-advised services or pure introductions. Any payments that are still allowed will be subject to the rules on clients' best interests and inducements; and
- clarifies that all complaints about any activities of a retail investment adviser should be reported to FCA.
The new rules will primarily amend the Conduct of Business Sourcebook (COBS) 6.1.A 4. FCA asks for comment by 4 October. (Source: FCA Consults on Retail Referrals)