It said it is “concerned” that some firms may be soliciting or providing payments that do not look like traditional commission, but are generally intended to achieve the same outcome.
The FSA has set out three examples of inducements that it is concerned by…
1. Cost contribution from a provider for distributor training/conferences/seminars etc…
The FSA said it considers that a provider organising, subsidising or paying for distributor training, conferences or seminars (involving costly social and entertainment events unrelated to the training) may be a prohibited inducement.
It said this is because it has the potential to impair compliance with the distributor’s duty to act in the best interests of the client, and may not enhance the quality of service to the client.
2. Payments to a distributor for assisting in the promotion of the provider’s retail investment products…
The regulator said it considers that any such payments should generally reflect the costs incurred by the distributor in the promotion, otherwise the payment may impair the firm’s ability to pay due regard to the interest of its clients.
The distributor’s assistance in promoting the provider’s products must, from 31 December 2012, also result in the enhancement of the quality of its service to clients.
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3. Payments to a distributor for the development of software necessary to operate software supplied by the provider…
The FSA said it has seen payments from providers to distributors for the costs incurred by distributors to update and enhance IT hardware and software as part of an overall development of an integrated provider/distributor IT solution.
Where the costs incurred by the distributor go beyond those which are necessary to operate software supplied by the provider, that part of the costs may impair compliance with the inducement rules, the regulator said.
Such costs would include those that can be attributed to the wider business benefit of the distributor.
