The Treasury’s investment advice requirements give firms more scope to provide information to customers on financial products and services. Read our summary of the requirements.
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The Treasury has published a response to its consultation on ‘Amending the definition of financial advice[1]’, stating its intention to shortly lay before Parliament regulations to change the requirements for advising on investments in Article 53(1) of the Regulated Activities Order. Here we summarise the implications for regulated and non-regulated firms.
Read the Treasury’s consultation response [2]
The changes
From 3 January 2018, the requirements for advising on investments will change following an amendment to Article 53 of the Regulated Activities Order[3]. The amendment means that most regulated firms will be exempt from the need to hold a permission to advise on investments under Article 53(1)[4] unless the firm is providing a personal recommendation.[5]
This exemption is designed to reduce the risks of firms carrying on a regulated activity without the right permission, giving them more confidence to provide consumers with information to make their own financial decisions.
What this means for different types of firms
- For the bulk of regulated firms that hold a permission other than, or in addition to, a permission to advise on investments or to agree to advise on investments. These firms will be able to take advantage of the new exemption in Article 53 of the Regulated Activities Order. These firms can provide advice on financial products and services without needing to have the permission for providing advice on investments under Article 53(1) so long as they do not provide personal recommendations. The new exemption is designed to reduce the risk for firms of straying into providing regulated advice without the correct permission.
- Regulated firms that want to provide a personal recommendation to a client. These firms will continue to need permission to provide a personal recommendation. However, these firms will also be able to provide advice on financial products and services without it being regulated activity if they also have another permission besides advising on investments or agreeing to advise on investments and they do not provide a personal recommendation.
- A handful of regulated firms that only hold permissions for advising on investments or for agreeing to advise on investments. For these firms the current scope of Article 53(1) of the Regulated Activities Order will still apply.
- Unregulated persons (i.e. individuals and firms which are not authorised by the FCA). No change: these persons may not provide regulated advice without authorisation. This is intended to protect consumers from inappropriate advice provided by unregulated firms and individuals, and from scams and fraudulent schemes.
Summary of the changes from 3 January 2018
| Firm type | Effect of changes on regulatory perimeter |
|---|---|
| Regulated firm with ‘advising on investments’ and/or ‘agreeing to advise on investments’ permission(s) and another permission. | These firms can provide advice on financial products and services without the advising permission(s). However, they will need to keep the advising permission(s) if they provide personal recommendations. |
| Regulated firm without the ‘advising on investments’ or ‘agreeing to advise on investments’ permission(s) but with another permission. | These firms can provide advice on financial products and services without the advising permission. However, they will still need to seek the advising permission(s) if they want to provide personal recommendations. |
| Regulated firm with ‘advising on investments’ and/or ‘agreeing to advise on investments’ permission but without another permission. | No change – the scope of regulated advice for which permission is required remains the same. |
| Unregulated firms and individuals. | No change – these firms and individuals will not be able to provide any form of regulated advice. |
Next steps
There is no need for firms to take any action now. Firms will not have to re-apply for existing permissions for advising on investments or agreeing to do so.
We need to make some changes to our Handbook and Regulatory Guides. We will consult on these changes later in 2017, and intend them to come into effect at the same time as the change to Article 53 of the Regulated Activities Order in January 2018. We will also consult on updating our guidance on regulated advice and personal recommendations, building on the guidance that we previously issued in FG15.1: Retail Investment Advice: Clarifying the boundaries and exploring the barriers to market development[6].
Notes
- HMT’s change to the Regulated Activities Order is only relevant to the regulated activity of ‘advising on investments’ specified in Article 53(1) of the Order.
- By ‘agree/agreeing to advise on investments’ we mean the regulated activity of agreeing to carry on specified kinds of activity (in Article 64 of the Regulated Activities Order) where that specified activity is advising on investments.