FSA confirms decision to retain consumer protection measures in revised investment rules
30th July 2007The Financial Services Authority (FSA) has today published a Policy Statement confirming that it will retain a number of specific consumer protection measures when its new rulebook for investment business - Conduct of Business Sourcebook (COBS) - is introduced on 1 November 2007.
The FSA previously outlined these measures in its Policy Statement 'Reforming Conduct of Business Regulation' in May this year, and this confirmation is one of the final stages in the completion of the revised rulebook for investment business. This will enable firms to finalise their preparations for the new regime.
As well as reflecting the FSA's drive towards principles-based and better regulation, the new rulebook incorporates the relevant conduct of business provisions of the Markets in Financial Instruments Directive (MiFID). Following discussion with the European Commission, the FSA is satisfied that the requirements it has retained are consistent with the objectives of MiFID and - where applicable - with the Directive's criteria for retention. These requirements principally cover:
- the conditions advisers have to meet to call themselves 'independent';
- the provision by advisers of a simplified prospectus or key facts document;
- for packaged products, the information advisers should give clients on how much commission, or commission equivalent, they are paying for the service being provided; and
- how investment managers use client dealing commission to pay brokers.
Andrew Sykes, Head of Retail Investment Policy at the FSA, said:
"In confirming our position on these measures, we are nearing completion of our new investment conduct of business rules that will come into effect later this year. These measures allow us to retain a number of important safeguards for consumers. We are only retaining measures where we have been able to show that the benefits of doing so will outweigh the costs.
"More generally, in line with our principles-based approach to regulation, our new investment rules will give firms greater freedom over how they meet both our requirements and the outcomes we expect."
The FSA also confirmed that advisers will still need to set out why the investment products they recommend are suitable for consumers in a suitability report (a simplified version of the current suitability letter). However, firms will have greater discretion over how they meet this outcome.
