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  • UK Financial Conduct Authority Publishes Measures to Improve the UK Financial Advice Market

    12/08/2017
    The Financial Conduct Authority has published a Policy Statement setting out new Handbook rules and guidance to implement some of the recommendations arising from the Financial Advice Market Review launched by the FCA jointly with HM Treasury in August 2015.

    The final report of FAMR made a number of recommendations aimed at addressing barriers to consumer access to advice in markets for retail, investments, protection and retirement income planning. The Policy Statement relates to three of those recommendations, namely:

    (i) Following a recommendation from FAMR, HM Treasury has amended the definition of regulated advice in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, so that it includes only advice involving a personal recommendation. The change to the definition will mean that, from January 2018, most authorised firms will only be providing financial advice to the extent that they provide a personal recommendation. Informal guidance from firms to support customers making an investment decision will not amount to or be regulated as financial advice. The policy statement sets out the revisions to FCA Handbook rules necessary to effect this change.

    (ii) The final report from the FAMR recommended that the FCA set up a dedicated team to provide regulatory feedback and support to firms that are developing mass-market automated advice models. The FCA established its Advice Unit in May 2016. The Policy Statement sets out new guidance based on the experiences to date of the Advice Unit.

    (iii) The FAMR also recommended that the FCA should develop guidance on what constitutes a personal recommendation. The Policy Statement states that the FCA will be issuing a further policy statement in early 2018 which will contain finalized perimeter guidance on personal recommendations, following further development of the draft guidance to address issues raised by stakeholders during the consultation process.

    The Policy Statement also sets out guidance for firms on how to comply with their Handbook obligations when dealing with "insistent clients". The term "insistent client" has been used to describe an individual who has received a personal recommendation and chooses to do something other than follow that recommendation.

    The Policy Statement is also consulting on retiring two pieces of non-Handbook guidance which are likely, for most firms, to be superseded from January 3, 2018 by the requirements of the revised Markets in Financial Instruments Directive. These are the FCA's non-Handbook guidance on inducements and conflicts of interest and on independent and restricted advice. Firms or individuals who believe this guidance will remain relevant for them following MiFID II implementation should provide feedback to the FCA by January 19, 2018.

    The Handbook rules and guidance take effect from January 3, 2018.

    View the Policy Statement (PS 17/25).