FCA warns firms over continued failures on inducements

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Firms providing hospitality for advisers are falling short of inducement and conflict of interest rules, the FCA says.

The regulator’s response to its 2015 thematic review of 23 providers, advisers and asset managers, published today, warns some advice firms are receiving payments from providers that exceed the cost of training and other activity.

In addition, the FCA says hospitality is not always being designed to benefit end clients with some events – such as golf or rugby matches – being tacked on.

The FCA says: “Individuals from firms had participated in or spectated at sporting or social events, such as golf, tennis and concerts. These benefits did not appear capable of enhancing the quality of service to clients as they were either not conducive to business discussions or the discussions could better take place without these activities.”

It adds: “Advisory firms incur costs when facilitating training or educational material supplied by product providers (for example setting up a webinar on the advisory firm’s systems) and when collecting management information on behalf of a product provider. Product providers were making payments to advisory firms in excess of the costs incurred.”

No firms have been named and the regulator will not give details on what type of firms have flaunted the rules.

However, in February Money Marketing revealed the contents of a letter sent from the FCA to a major pension provider detailing the instances where inducement rules were broken.

These included two pop concerts, stand-up comedy, sailing and West End theatre.

Finalised guidance was published in 2015 and three years ago the FCA sent a “Dear CEO” letter uncovering firms working around the commission ban.

In response the regulator wrote to 23 providers, advisers, and asset managers asking for more details of distribution agreements and hospitality benefits.

The regulator is not taking any further action, saying: “Your firm should consider these findings and expectations and ensure they meet the current requirements.”