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Sheila Nicoll

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The rules published today are designed to enable consumers to understand the services they are being offered by investment firms, and what they are paying for.

FSA/PN/067/2011
01 Aug 2011

The Financial Services Authority (FSA) has today published rules on platforms regulation. This follows a review of the regulation of platforms in the context of the objectives of the Retail Distribution Review (RDR).

The rules published today extend the consumer protection elements of the RDR into a rapidly developing area of investment services. These new rules have two key aims; firstly, to ensure that consumers receive a better service and, secondly, for the market to be more transparent and operate more efficiently.

The key rules designed to provide better service for consumers:

  • require platforms and other nominee companies to transfer, within a reasonable time and in an efficient manner, assets held on behalf of customers to another person, when requested; and
  • require platforms and other nominees to pass on fund information to the end investor.

To enable greater transparency and efficiency in the market, the rules:

  • require investment adviser firms using a platform service for the purposes of making a personal recommendation, or arranging the purchase of retail investment products for retail clients, to take reasonable steps to ensure that they use platforms services that present their retail investment products without bias;
  • require platforms to disclose to professional and retail clients any fees or commission they arrange to accept from third parties in relation to retail investment products. These should be disclosed in advance of the platform providing services to those clients;
  • extend the application of the RDR rules on facilitating payment of adviser charges to facilitation through platforms - for instance, if a platform has client cash accounts, it could enable payments of adviser charges out of such accounts; and
  • require nominees to respond to information requests by authorised fund managers for liquidity purposes.

In respect of incentives, the FSA has decided that it would be desirable, in principle, to ban both cash rebates from product providers to investors and product provider payments to platforms. However, given the potential impact of these changes on the business models of platform service providers, the FSA has concluded that further research is needed to ensure that the implications for consumers are fully understood before proposing new rules.

Sheila Nicoll, the FSA’s director of conduct policy, said:

“The rules published today are designed to enable consumers to understand the services they are being offered by investment firms, and what they are paying for.

“With more and more business being conducted through platforms, it is important that customers are clear who is charging for what, and for what service. It is also important that customers and their advisers can move their investments quickly and easily, particularly if they are dissatisfied with the service they receive.

“We also believe that it is likely to be in the best interests of consumers that product providers’ payments to platforms and cash rebates from product providers to investors should be banned. But we need to analyse the impact on consumers and on firms’ business models before we propose any new rules.”

Notes to editors

  1. Policy Statement PS11/9 can be found on our website.
  2. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; securing the appropriate degree of protection for consumers; fighting financial crime; and contributing to the protection and enhancement of the stability of the UK financial system.