European politicians' decision to vote against a Europe-wide ban on adviser commission and cash rebates to clients throws a spanner into the works of the FSA's RDR project, according to fund managers.
As part of the Retail Distribution Review (RDR)... the FSA has banned distributors from receiving commission and, in a recent paper on platform regulation, also proposed a ban on cash rebates being handed to consumers - as it presses to avoid all forms of ‘commission bias’ in product sales. But the European Parliament’s economic and monetary affairs committee last week voted to reject a Europe-wide commission ban and also said that rebates direct to consumers “are acceptable”, as it finalised amendments to the Markets in Financial Instruments Directive (MiFID).
The IMA said if these rulings became law the FSA would not be able to ban European-domiciled funds from continuing to pay cash rebates to UK investors, since the FSA cannot regulate funds domiciled outside the UK. This could create a situation in which fund managers simply have to move their funds to Europe, domiciling them in fund centres such as Luxembourg or Dublin, and then passport them in for UK distribution to avoid the cash rebate ban.
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