View the article online at http://citywire.co.uk/wealth-manager/article/a761490
FCA clarifies advice definition as it launches consultation
by Danielle Levy on Jul 11, 2014 at 13:16
The FCA has sought to clarify the boundaries between different investment advice models as it launches a guidance consultation.
The regulator found that firms are being clear on the requirements for full advice and execution-only business post the introduction of the retail distribution review (RDR) in January 2013. However, they are struggling to navigate the options in between full advice and execution-only. For example, simplified advice or limited advice services and sales where personal recommendations are not made but involve guiding the client in some way.
The FCA said that for advice to be regulated at all, it must relate to a specific investment and must be given to the person in their capacity as an investor or potential investor, or as an agent for an investor or potential investor. It must also relate to the merits of them buying, selling, subscribing for or underwriting the investment.
If it does not have all of the following characteristics then it is generic advice and is not regulated, the FCA concluded, citing the following examples:
- Advice to a customer to buy shares in ABC plc or to sell Treasury 10% 2014 stock is advice about a specific investment and so is regulated.
-Advice to buy shares in the oil sector or shares with exposure to a particular country is generic advice because it does not relate to a specific investment.
-Advice on whether to buy shares rather than debt is generic advice and is not regulated.
-General advice about financial planning is generic advice and is not regulated.
-Guiding someone through a decision tree where they make their own decision, would not normally be advising on investments.
Boundary between information and advice
News sponsored by:
As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.
Today's top headlines
With talk on interest rates on the horizon, our latest roundtable debate covers income investing against a changing backdrop