If you pay attention to IFAC audits, follow what IFAC say and implement changes IFAC recommend, you hardly need to worry about these missives from FCA. IFAC have you covered!
However, on a “need to know” basis of management…..”you need to know.”
So here is your two minute guide to the FCA Mifid Disclosure review.
FCA looked at the costs and charges disclosures of a sample of 50 firms in the retail investment sector. They wanted to understand if firms were complying with the new rules.
FCA found firms fell short when disclosing third-party costs and charges. That means not enough disclosure of underlying UCITS and DFM transaction costs – ie the costs of buying and selling. For instance, while most OEICs will churn up to 100% of their book annually at, say ½ per cent bid offer spread for each stock, this adds the same ½ per cent to the annual management costs – but is rarely disclosed. But you need to disclose it!
MiFID II came into effect on 3 January 2018. Since then, firms have had to change costs and charges disclosure in annual suitability reviews. See the IFA templates on the doc library - search“guide to mifid charges”.
FCA looked at IFAs, DFMs, direct-to-customer investment platforms and other investment managers (who don’t actively advise themselves). They looked at websites (a particular favourite of theirs) and your communications to your clients in SRs and statements.
As a reminder, firms must give clients information on all costs in good time before arranging the deal.
This is the ‘ex-ante’ (before the event) disclosures. And then again ‘ex-post’ (after the event) disclosures must be made annually.
As usual, there was confusion in the market and no consistent interpretation of the rules. But it was clear that “most of them had given this serious consideration and were trying to comply with the rules.”
FCA found examples of good practice that they particularly liked
FCA focus in the near future is here:
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