In September 2016, the FCA published its third MiFID II consultation paper, Consultation Paper 16/29: Markets in Financial Instruments Directive II implementation – Consultation Paper III. The deadline for comments on this consultation was 31 October 2016. Our blog entry is here.
The City of London Law Society (CLLS) has now published its response to the FCA’s consultation.
Interestingly when responding to the FCA’s proposals applying the MiFID II inducement rules for independent advice to all advice provided to retail clients the CLLS raises certain extra-territorial issues. The CLLS states:
“The FCA is proposing to implement the above as follows:
- The RDR Rules will apply to advisers in relation to RIPs [retail investment products] specifically; and
- COBS 2.3A will apply the MiFID II inducements ban to independent/restricted advisers more generally.
The issue we wish to highlight is that the RDR Rules only apply where the advice is given to retail clients in the UK. We note that neither COBS 2.3A nor the application section in COBS 1 appear to include this same territorial scope restriction. This proposal will, therefore, have the consequence of having advice in relation to non-MiFID scope RIPs be subject to the UK’s gold-plated ban in the RDR Rules when advice to given to retail clients in the UK only. However, the UK’s gold-plated MiFID II ban in COBS 2.3A will apply when advice is given to retail clients wherever they may be located. This UK-specific extension of the MiFID II ban will, therefore, apply to UK firms operating cross border into another EEA member state and to EEA branches of UK firms relying on the UK firm’s services passport. Given that the FCA is gold-plating this element of MiFID II, we would query why the FCA is not limiting the scope of this gold-plating to where advice is provided to retail clients in the UK (as is the case in the RDR Rules).”