The FSA has published a speech by Dan Waters (Director of Retail Policy and Themes & Asset Management Sector Leader, FSA) entitled Key regulatory challenges for platforms.

In his speech Mr Waters discusses the following six points in relation to Discussion Paper 07/02: Platforms: the role of wraps and fund supermarkets (DP07/2):

  • Principles based regulation. In DP07/2, the FSA put forward its view that principles-based regulation was the right approach for this market. The FSA does not propose to bring in any new rules at this stage. However, the FSA has not discounted the possibility of bringing in new rules in some areas in the future where this would be necessary to ensure that consumers are protected.
  • The packaged product regime. In DP07/2, the FSA asked whether the FSA Handbook posed problems for firms in this market, including in particular the packaged product regime. Some respondents felt the packaged product regime was unhelpful and not aligned with new services and business models. Mr Waters states that that in general the FSA believes that the concerns over the packaged product regime are overstated. The regime fulfils an important role by levelling out the differing requirements of the Markets in Financial Instruments Directive and other EU Directives. 
  • Disclosure, especially of charges. In DP07/2, the FSA asked how disclosure could best be achieved. Mr Waters states that there was widespread support for the need for clear and transparent disclosure but little agreement on the best way that this could be achieved. Mr Waters states that disclosure is an area that needs further work and that the industry needs to achieve greater transparency in its language and presentation. He also states that inadequate disclosure will not meet one of the key outcomes of the TCF initiative. Following the publication of the Feedback Statement on platforms the FSA will engage with industry to take this issue forward.
  • Re-registration. Mr Waters discusses re-registration, particularly in relation to PEP/ISA holdings. In the DP07/2 the FSA asked whether platforms should allow customers to re-register assets away from a platform. There was almost universal agreement that re-registration should be allowed. Mr Waters states that the FSA supports the view that re-registration in specie should be allowed. For firms that have not modelled for this the FSA would consider that the application of a reasonable charge to cover the cost of facilitating the transfer would be a pragmatic solution.
  • Use of platforms by intermediaries. In DP07/2, the FSA set out issues that intermediaries should be considering when using platforms. In addition, Mr Waters states that the FSA published a factsheet that can be found in the small firms section of its website. This discusses how intermediaries should use platforms.
  • Duties of platforms in the provider/distributor chain. In this part of his speech Mr Waters refers to the FSA’s good practice illustrations of the managers of UK authorised collective investment schemes. Mr Waters discusses the additional chapter in DP07/2 which concerned the responsibilities of providers, distributors and platform providers for the fair treatment of customers. Mr Waters states that in the provision of services to an end customer, a platform provider creates its own responsibilities to that customer, even where that customer also uses the services of an adviser. The FSA suggests that one of these responsibilities will be to ensure that these very product providers upon whom the good practice illustrations are focused are able to carry out all the distributor identification and analysis of sales volumes that they need to be able to do to ensure that retail customers who end up with their products are being treated fairly. Mr Waters states that the FSA believes that the platform providers should be able to provide it with the ‘wherewithal’ to meet their responsibilities. However, this does not require platform providers to opt down to retail customer status under COBS 3.7.1R. In addition, Mr Waters states that the platform provider bears responsibility for particular duties to the retail customer. These duties include ensuring that customers receive full and timely information on any changes to a product held in a nominee account.

Mr Waters states that the FSA will publish a Feedback Statement on DP07/2 in April 2008.

View FSA speech - Key regulatory challenges for platforms, 29 February 2008