A recent speech by Linda Woodall, Head of Investments Department, FSA acts as a reminder that there is now just 14 months to go before the RDR comes fully into force.
The RDR will be a consideration for those firms that will have a combination of Retail Client + Personal Recommendation + Retail Investment Product. Two points that firms should not overlook: one of the triggers is ‘personal recommendation’ – regardless of whether it is given by a traditional High Street financial adviser or a niche discretionary investment manager. In addition, ‘retail investment product’ (RIP) will have a wider remit than the current ‘retail investment’.Included in the definition of a RIP there is a ‘catch-all’ description of ‘any other designated investment which offers exposure to underlying financial assets, in a packaged form which modifies that exposure when compared with a direct holding in the financial asset’. The FSA do not wish to be prescriptive by expanding on this and will leave it to firms’ judgement (and para 2.7 of PS10/6 advises ‘if firms are in any doubt they should assume that products are caught’).
At this point (and at the risk of repeating what we have said in our article on page 6 – ‘FSA Action on Unregulated Collective Investment Schemes’) it is worth noting from the speech that the FSA has ‘significant concerns’ over the sale of unregulated collective investment schemes(UCIS) – which will be regarded as a RIP – and informs us that they will ‘continue to closely monitor firms that sell UCIS and will continue to take enforcement action against firms that sell them inappropriately’.Although ‘sell’ is a defined term, it would probably be wisest to assume that the FSA’s interest in UCIS would run the gamut of advising to marketing. With regard to the latter we would remind firms that wish to market UCIS to ensure that they are in compliance with the requirements of COBS 4.12 before so doing.
Whilst they may neither make personal recommendations nor have retail clients, the FSA reminds all that product providers will also have to be ready for RDR, including necessary system changes e.g. COBS 6.1B, which will come into force 31 December 2012, will prevent RIP providers from offering commission.
Further details on the RDR can be found in Regulatory Roundup 32.
