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FCA clarifies advice definition as it launches consultation
by Danielle Levy on Jul 11, 2014 at 13:16
The regulator noted that the difference between ‘information’ and ‘investment advice’ is the element of opinion or judgement on the part of the adviser, either in person or, for example, online. Regulated advice involves recommending a course of action or making a judgement on the merits of exercising a right, for example to sell or buy.
The FCA advised that generally if information is given to a client and nothing more, this does not involve giving regulated advice.
For example, giving facts about the performance of investments, the terms and conditions of investment contracts, or the price of investments, does not involve regulated advice if the investor is left to exercise their own opinion on the action to take.
However, adding complexity to the issue, it said the circumstances in which information is provided can make it regulated advice.
For example, if information is provided on a selected rather than balanced basis so that it influences or persuades, this may be regulated advice.
If, for example, share price information is given in circumstances which suggest that the firm is communicating that it is a good time to sell, then what appears to be the provision of information may, in fact, be advice.
Providing definitive guidance on whether something is regulated advice depends not only on the facts of the individual case, but also the context, the regulator noted.
The FCA clarified that an adviser is giving a personal recommendation if these three elements are covered:
- A recommendation is made to an investor or potential investor, or someone acting as an agent for an investor.
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