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FCA delivers legacy rebate ban shock for platforms
by Jun Merrett on Apr 26, 2013 at 07:12
The Financial Conduct Authority (FCA) has banned cash rebates and fund manager kick-backs on legacy business on platforms.
In the FCA’s first policy statement, the regulator said the measures would come into force on April 6 2014 but has given providers until 2016 to implement systems to adhere to the rules, which will impact both advised and execution-only platforms.
In the regulator's consultation on its platform rules, it had proposed a ban on cash rebates and fund manager kick-backs only for new business, which would not have required all investors on platforms to move to a clean share class. But referencing HM Revenue & Customs' announcement earlier this year that platform rebates to consumers were taxable, it said that move would have been 'a potentially tax inefficient solution for consumers'. But it added that imposing a ban on legacy rebates in line with its original timetable of 31 December 2013 would have been 'operationally challenging'.
It has outlined a 6 April 2016 deadline for platforms to eradicate cash rebates and fund-manager kick-backs on legacy business, while they will be banned on new business from 6 April 2014.
'This revised approach would provide firms and consumers with flexibility to determine when to switch away from legacy assets,' it said. 'At the end of the two-year transitional period, however, platforms would not be able to retain any rebates for legacy business, but would have to be funded by platform charges only.'
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What others are saying
by Himanshu Singh on Dec 07, 2013 at 04:57