The FSCP, which acts as a voice for consumers and feeds in to FSA consultations, raised concerns that a failure to ban commission across the EU could undermine the FSA’s ban in the UK, which comes into force on December 31. Speaking at an EU regulation seminar hosted by the British Bankers’ Association, FSCP working group chair Mike Dailly said: “As we approach the much anticipated implementation of the RDR in January 2013 we need to ensure that there is no dilution of the ban on commission. The removal of commission is key to ensuring that providers of financial products act as the true agents of their customers.”
The Markets in Financial Instruments Directive (MiFID) is currently being debated in the European Parliament. While most UK MEPs support a cross-Europe ban, MEPs from many other countries - including influential Member States such as Germany - are opposed. The FSA itself has stated that the RDR will be able to go ahead regardless of the final wording of MiFID, because Member States are allowed to toughen up MiFID’s requirements in their own jurisdictions. Some Directives prevent countries from layering on these additional powers, but crucially MiFID does not.
In spite of this, some UK MEPs have warned that the failure to secure an EU-wide ban could other see advisers based outside the UK selling products that offer commission into the UK, and could threaten other core RDR principles such as the ban on cash rebates to end-clients.
In recent weeks European political debates have brought up two major conflicts with the RDR, which could cause the FSA problems when it comes to implementation in the coming months. The latest vote on amendments to the MiFID by the European Parliament’s Economic and Monetary Affairs committee rejected initial calls for a Europe-wide ban on commission, reflecting strong opposition from the continent, in particular Germany.
The committee also decided cash rebates were acceptable, at odds with the FSA’s ban, which the IMA has warned could put UK funds at a disadvantage to European-domiciled funds.
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