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08 May 2013

FCA Considers Rebate Ban On Sipps And Other Markets

The Financial Conduct Authority (FCA) is going to hold a consultation on extending the ban on platform fund rebates to Sipps, life companies and discretionary fund managers, the FT Adviser reported.

The authority published a policy statement last week, in which it laid out its plans to ban platform fund rebates to cash rebates and fund manager kick-backs for new business from April 2014. The FCA commented that failure to apply the rules to all areas of the market might lead to the creation of loopholes that could allow businesses to adjust their services and avoid the rules.

In essence, Sipps are products that include a number of underlying investments in a way very similar to the platforms, the regulator said. It would be reasonable to apply the same rules to Sipps, leading to consumers paying directly for a Sipp, just like they do for platform services.

Industry representatives commented that if the same rules do not apply to the entire platform, consumers might be confused if they see that one product is being treated in a different way to another, while they are actually very similar.

The FCA explained that the extension of the rules to life companies would be more complicated but still argues that implementing the same rules would make sense. If the ban is not extended to life companies, providers might start “buying distribution,” it stated.

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