Financial Conduct Authority
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FSA publishes an RDR Interim Report and feedback on the review of personal investment firms' prudential requirements
The Financial Services Authority (FSA) published an interim report today setting out the current thinking on the Retail Distribution Review (RDR) following a six-month consultation with the market.
Feedback to the discussion paper, published in June 2007, called for a simpler marketplace, particularly a clear separation between advice and sales.The interim report, which is not a final policy document, sets out how this might be achieved as well as acknowledging the significant challenges this separation poses.
This report is being published now to maintain momentum and will be followed by a full feedback statement in October which will set out in more detail the regulatory implications and timetable for change, once further work has been done.
Amanda Bowe, FSA's Head of the RDR, said:
"We have been listening very carefully to the feedback provided over the last few months and today�s report shows how we are likely to respond to that. Respondents told us to keep things simple, have a clear distinction between advice and sales, ensure alignment with the potential Money Guidance service, and pursue our aims of raising professional standards.
"We think a simple landscape is important if consumers are to understand the industry and have trust and confidence in those they are dealing with. And we think the industry needs to be able to serve the changing needs of consumers as well as treat them fairly. However, we do not underestimate the significant difficulties that come from this simple picture and we need to deepen our understanding of the impacts on consumers and firms - in particular whether this structure is economically viable.
"There is still a great deal of work to do, therefore, before we take any decisions about regulatory change and set out the timetable for that change. We remain committed to taking the time to get things right and will introduce proposals that will lead to a more efficient and effective retail investment market for everyone - consumers and firms."
The FSA is also setting out three key challenges for the industry to deliver market-led solutions. These relate to professional standards; remuneration arrangements; and the provision of simple services to consumers.
In a separate move, the FSA has published today the results of feedback on possible prudential rule changes to help reduce the frequency and impact of any poor or unsuitable advice by firms in the personal investment firm sector.
The Feedback Statement on the Review of the Prudential Rules for Personal Investment Firms (PIFs) sets out responses to the discussion paper DP07/4 published in July last year, and is aligned with the RDR Interim Report. Feedback to the DP suggested that the link between prudential rules and poor or unsuitable advice was too indirect to reduce its frequency, but that there is more scope to reduce its impact by providing resources to deal with claims.
The FSA will consider further how to extend and refine the current capital resources requirements according to the size of a firm, and creating arrangements for firms that stop trading to bear greater costs of customers' claims than is currently the case. The FSA plans to consult on proposed changes later this year.
Notes for editors
- The interim report and feedback statement can be found on the FSA website.
- The FSA's Retail Distribution Review Discussion Paper, DP07/1, was published in June 2007. For more details see press notice 076/2007.
- The RDR was launched in June 2006 by the former FSA Chief Executive John Tiner. The problems in the retail market were also highlighted by FSA Chairman Callum McCarthy in a speech made at a Savings & Pensions Industry Leaders' Summit in Gleneagles in September 2006.
- Director level responsibility for the RDR will pass from Stephen Bland to Dan Waters, FSA Director of Retail Policy and Themes Division, on 29 April 2008 following Stephen's change in role to Director of Wholesale Firms.
- The discussion paper DP07/4: Review of the Prudential Rules for Personal Investment Firms was published in July 2007.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.