The UK Financial Services Authority has responded that it is not concerned about a vote carried by the European Parliament's Economic and Monetary Affairs Committee (ECON) to effectively allow commission payments to retail clients under certain circumstances.
The FSA continues to operate on a joint basis through organisations such as Iosco to put forward its view, as well as continuing to send people directly to Brussels to lobby. And the spokesperson added that MiFID II is still very much in discussion.
What seems suggested by the European Commission’s own proposal for MiFID II set out in October 2011 is that the issue of commission does not form part of MiFIR, the Regulation, which has been pushed on a parallel track to MiFiD in terms of the political process. MiFIR is intended to introduce binding rules that cannot be adjusted by national jurisdictions in areas such as clearing, trading of derivatives, and transparency of trading data. As such, it currently seems unlikely that a ban on commission would be enforced via a European Regulation. Instead the issue of commission rests with a Directive. This may explain the FSA’s relaxed attitude because it knows that as the responsible authority at the national level it is likely to have some leeway to maintain the UK specific commission ban.
But, the continued insistence of a commission ban in light of the ECON vote has caused the UK’s Investment Management Association to respond strongly in a letter sent to the UK FSA. The IMA’s members represent some £4.2trn of AUM managed in the UK, and now find themselves in the position of having to consider whether or not sales of UK domiciled funds will come with a commission ban, but sales of funds domiciled in other EU member states will not.
Writing to Rob Muskett, Investments Policy Department at the UK FSA, in response to the regulator’s Consultation Paper 12/12 Payments to Platform service providers and cash rebates from providers to consumers, the IMA said: “The European Parliamentary Committee has agreed as part of the MiFID review that rebates directly to consumers are acceptable. If the UK persists with its proposal to ban cash rebates to investors in funds, then it is not certain that it can ban (directly or via rules on UK intermediaries) cash rebates to investors from non-UK Ucits. This raises a serious concern about UK competitiveness and might leave the UK open to legal challenge.”