MiFID II does not threaten ban on financial advisor commission says FSA

4 November 2011

The Financial Services Authority’s (FSA) proposal to ban commission for all financial advisors as part of the the retail distribution review (RDR) is compatible with the Market in Financial Directives (MiFID) recommendations, an official has said.

According to the latest draft of the European legislation, which is due to come into force by 2015, the ban on commission would only apply to independent advisors but payment will still be allowed for those which fall outside of this bracket.

The proposals appear to be in direct contradiction to the FSA’s plans to implement a total ban on the practice by 2013.

However, Sheila Nicoll, FSA head of conduct policy, told an industry conference that she was pleased to see the “similarities” between the proposals and how “compatible” they both are.

“While the MiFID II proposals explicitly provide for a ban on commission when firms describe their advice as ‘independent’, the draft directive does not prohibit regulators from going further. In the UK we will already have banned commissions set by product providers - for advisers of all types - when MiFID II comes into force,” she explained.

MiFID II is an update to a piece of legislation originally published in 2007 and is designed to change the regulation of trades in the financial services sector.

By Jim Ottewill

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