Treasury updates on financial advice

Treasury has published the outcome of its consultation on the definition of financial advice. It has decided to amend the definition so that:

  • regulated firms will be giving advice only where they provide a personal recommendation; but
  • the wider (current) RAO definition of “advising on investments” will remain to define the regulatory perimeter.

Treasury believes this approach will give greater certainty to authorised firms but will mitigate the risk of consumers being scammed. Treasury will need to change the legislation, and will shortly publish a statutory instrument that will take effect from 3 January 2018 with MiFID 2. The instrument will exempt regulated firms from requiring authorisation to carry out activities under article 53 RAO, except where they are making a personal recommendation (as defined in MiFID, but will include non-MiFID instruments such as insurance). FCA will also need to publish new guidance.

FCA has published an explanatory note, setting out what the change means for different types of firm. Many firms, who hold an advising permission among their bundle of permissions,  will be able to advise on financial products and services without a specific advising permission – which they will need only if making personal recommendations. FCA says firms need do nothing now, and will not have to reapply for any existing permissions.


FIN. Team