In its response to the FSA's consultation paper "Payments to platform service providers and cash rebates from providers to customers" the Investment Management Association (IMA) has asked for clarity about what can be paid to platforms and expresses concern about the FSA's proposed approach to cash rebates for investors.
IMA is fully in favour of transparency and effective disclosure to consumers and agrees that it is right for platform charges to be disclosed to and agreed by clients. The lack of clarity about what can be paid to platforms, and for what services, is unsettling when platforms and fund management firms are in the process of agreeing new business arrangements in order to implement RDR.
The FSA's proposal to ban cash rebates to investors but to allow 'unit rebates' (which will involve a series of unit purchases and redemptions) is illogical, is unlikely to meet the consumer's need for clarity and understanding, and will inevitably lead to confusion. The cash rebate ban is also at odds with the recent European Parliamentary agreement on the MiFID review that rebates to consumers are allowed.
Julie Patterson, IMA Director of Authorised Funds and Tax, said:
"It is not acceptable to have uncertainty about what can be paid to platforms and for what services. Fund managers and platform providers need to have absolute clarity to allow them to set up appropriate business models to accommodate the new rules. Systems cannot be set up overnight.
"Also, it is inexplicable that after more than six years of debate, the FSA is now proposing a messy and opaque system of unit purchases and redemptions. This smacks of the system of 'factoring' in the insurance industry, which the FSA has long said is unacceptable.
"Moreover, this proposal does not fit with the recent agreement by the European Parliamentary Committee on the MiFID review*. It is not clear that the UK will be able to prevent foreign fund managers from passing cash rebates to UK investors. This proposal could therefore be damaging to the UK's competitiveness."
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