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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.

Personal recommendations

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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5 comments so far. Why not have your say?

Neil Shillito

Jul 11, 2014 at 13:29

Very, very clear. The ambulance-chasers are going to clean up.

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Philip Milton

Jul 11, 2014 at 13:33

That's interesting - as it suggests that if it is NOT regulated then you don't need to be qualified to provide it as it's not advice. Additionally, if it's not REGULATED then someone can't lodge a complaint with the FOS (or I shoudl say it's outside of the FOS' jurisdiction)!

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ray silvester

Jul 11, 2014 at 13:56

If an adviser (is that the right term?) is not authorised then he/she will be at great risk of giving regulated advice illegally. So surely all advisers/salespeople should be authorised, full stop.

Furthermore if an advisor/salesperson contacts the client then it is most likely he/she is going to give regulated advice. So anyone contacting a client should be authorised and shouldn't be allowed to contact the client if unauthorised.

If a client contacts the investment adviser then it is likely that the adviser could be unauthorised and give only factual advice and not regulated advice.

It all seems quite simple to me but unfortunately where there is money involved the rules & regulations take second place.

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Jul 11, 2014 at 13:56

"the circumstances in which information is provided can make it regulated advice."

"a firm may provide a recommendation in the form of an investment bulletin that is not targeted at individual customers without it constituting a personal recommendation and therefore triggering the suitability requirements. However, this could still amount to regulated advice."


Therein lies the real problem - lack of certainty for regulated firms.

For unregulated firms it's much worse for the client. If the firm strays into regulated advice there is no PI, no FOS and no FSCS.

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ray silvester

Jul 11, 2014 at 14:00

Or, as the article puts it:

...low cost models designed to meet this need deliver good outcomes for clients in a way that is also commercially viable for those who supply the products and services

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