Was yesterday’s platform legacy rebate consultation news a U-turn? Or was it just a clarification of what most people who read the last platform paper already assumed?
Either way, just when everyone thought the platform rules saga had been concluded by the FCA’s April policy statement, the regulator has confirmed it will now be required to issue another consultation on draft guidance in September into the treatment of legacy cash rebates.
The omission of a definite yes or no on whether legacy cash rebates would be allowed to continue post-April 2014 seemed to slip under everyone’s radar when the paper was published, with most people assuming this would be the case.
However, feedback to the regulator suggesting that clarity was needed means we will now see a new wave of responses to the proposed requirements which may well result in some platforms voicing their displeasure at the allowance of legacy cash rebates on an indefinite basis.
The FCA has stated its preferred option at this stage is to allow cash rebates to continue on legacy business “indefinitely” where there is no change made to the investment after the ban on cash rebates for new business comes into force in April 2014.
Skandia says the new consultation is creating further confusion while FundsNetwork has described the situation as “a mess”. Transact managing director Ian Taylor says the uncertainty means the development of systems, which need to be ready in less than a year, has to be put on ice until the matter is settled.
It is unclear how platforms will be able to facilitate cash rebates after the regulator’s separate ban on legacy payments between fund managers and platforms is implemented in April 2016. Some may have preferred the regulator to end all cash rebates from that point onwards.
The rules could also make it harder to justify bulk switching of all clients into clean share classes when the terms a client was getting on a legacy holding with a rebate may represent a better deal.
It will be interesting to see whether the September paper provides further clarification around what the regulator classes as a ”disturbance event” on legacy investments, therefore ending the rebate.
Although the FCA says yesterday’s note was not a change to the rules but simply a re-statement of intent, it has muddied the waters again.
Given the way the regulator flip-flopped a number of times through the twists and turns of previous platform policy papers, firms can be forgiven for being cautious.
Sam Macdonald is wrap and technology reporter at Money Marketing – follow him on Twitter here