FSA voices concerns over European legislation

The FSA has raised concerns over the implementation of key European directives including MiFID and the proposed regime for packaged retail investment products (PRIPs).

Speaking at the Chartered Institute for Securities & Investment annual conference, FSA director of conduct policy Sheila Nicoll said the regulator is forging ahead with the UK's retail distribution review (RDR) despite ongoing regulatory uncertainties in Europe.

"We are often asked why we are going ahead with the RDR in advance of developments in Europe," said Nicoll (pictured).

"I will repeat here we feel there are significant issues to deal with in the UK market, and we should not wait and depend on an uncertain European timetable before sorting them out."

However, Nicoll said the FSA is "concerned" the European Commission's implementation of the PRIPs regime could lead to an unlevel playing field for competing retail investment products.

FSA fears revolve around the Commission's plans to deliver PRIPs through changes to both MiFID and the Insurance Mediation Directive depending upon the type of product or service being offered.

"We fear this would result in divergence, allowing different selling standards to develop across different markets," she said. "This would seem to us to defeat the original object of the initiative."

Moving on to MiFID - draft legislation of which is expected in the autumn - Nicoll said it is unclear what the Commission "has in mind" with the proposal.

Whilst welcoming the move for firms offering investment advice not to have remuneration set wholly or in part by product providers, she said the directive does not go far enough because it only covers independent advisers.

The market could be distorted if only one type of adviser is subject to the restrictions, she said. 

Meanwhile, she said the FSA is "acutely conscious" it still has more work to do on RDR. Aware the platform community is "eagerly anticipating" publication of final rules, she acknowledged more work has to be done around the subject of legacy assets.

Hinting at the depth of changes likely to be ushered in under its final rules, she said platforms will be required to re-engineer their systems.

"We, together with those with whom we are having extensive discussions, recognise the need for certainty, in order for systems to be redeveloped ahead of the (RDR) deadline," she said.