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Opinion: EANDCB validation
O rigin: d omestic
-
RPC reference number: RPC 4261/4262/4263/4264/4265/4267/4268/4269/4270 - FCA
Date of implementation: see table
MiFID II: inducements; research and inducement; taping; best-execution; client
categorisation; independence; disclosure; OPS; investment research
Financial Conduct Authority
RPC rating: validated
This opinion covers nine measures; for each, a brief description of the change, its impacts and the quality of the submission is
given in the table below. The combined equivalent annual net direct cost to business (EANDCB) is underneath.
General Comments
For the proposed measures outlined below, the FCA has supported its analysis of the impacts on business with data from
industry, business surveys, and consultations. The RPC is pleased to see the comprehensive approach taken by the FCA,
drawing on several different sources, including consultation with industry. The analysis is concise, but some areas require an
understanding of both the industry and existing regulatory landscape. The assessments could have been improved had the FCA
presented its assessment in terms that are likely to be understood by the general reader.
Measure Description Impact Quality of submission
RPC-4261-FCA- MiFID II prohibits firms which provide The regulator explains that firms The regulator has
Extension of investment advice on an independent affected are those providing financial provided a sufficient
certain MiFID II basis from accepting or retaining any advice or portfolio management level of evidence for the
inducement fees, monetary or otherwise, in relation services to retail clients on MiFID RPC to believe that the
Date of issue: 26/06/18
www.gov.uk/rpc 1
Opinion: EANDCB validation
O rigin: d omestic
-
RPC reference number: RPC 4261/4262/4263/4264/4265/4267/4268/4269/4270 - FCA
Date of implementation: see table
provisions to to the services they provide to clients. instruments; the FCA estimate that quality of analysis for
firms providing The changes presented here extend there are 16,854 such firms. It this measure is fit for
investment this prohibition to firms which provide estimates total one-off familiarisation purpose. The
advice and investment advice on a restricted basis costs of £4.7 million. The regulator assessment uses a
portfolio i.e. advice restricted to certain products also estimates limited ongoing reasonable and
management to and/or providers. implementation costs, on the grounds proportionate approach
retail clients that the new rules mirror existing to analyse potential
Retail Distribution Review (RDR) costs to business.
Implementation rules and therefore will require no
date: 3rd material change to firms’ systems.
January 2018
RPC-4262-FCA- Under MiFID II, the ban on accepting or The FCA estimates that 311 firms will During the consultation,
Extension of the retaining any fees relating to the incur direct material costs from this the regulator noted that
MiFID II provision of services to clients, does discretionary policy decision, as it has some survey
research and not apply to research. Firms providing decided to exempt collective portfolio respondents were
inducements individual portfolio management are managers from the provision. The unsure of the precise
provisions to allowed to receive research without FCA states that the cost of external legal interpretation of
collective breaching the inducement rules, as research purchased by the firm some of the
portfolio long as the research is paid for directly should not be included as firms were requirements and that
managers already paying for research. The there is, therefore, some
from the firm’s resources or through a measures just changed the payment uncertainty survey
Implementation Research Payment Account (RPA). A method. It should be noted, however, responses. It argues
date: 3rd RPA is funded by separate charge to that any additional cost of paying for that the benefits of the
January 2018 the client and must be agreed and external research caused by the measure to consumers
disclosed. The changes presented here changes has been included in the will outweigh the costs
Date of issue: 26/06/18
www.gov.uk/rpc 2
Opinion: EANDCB validation
O rigin: d omestic
-
RPC reference number: RPC 4261/4262/4263/4264/4265/4267/4268/4269/4270 - FCA
Date of implementation: see table
extend the requirements to collective analysis. The regulator estimates, but does not present
portfolio managers (CPMs). based on survey results, that 33%- benefit estimates to
76% of affected firms do not delegate support this assertion.
investment management and will The RPC confirms that
therefore incur costs as a result of the approach adopted
these changes. The FCA estimates, by the FCA is
based on the same surveys, that total reasonable and
one-off costs are between £3.8 -£8.4 proportionate but
million and ongoing costs between £2 agrees that the
-£4.5 million. assessment could have
been improved had the
survey questions been
clearer. The RPC also
notes that the
assessment could have
been improved by
presenting appropriate
benefit estimates.
RPC-4263-FCA- Existing FCA rules require certain firms The FCA estimates a total of 1,184 The RPC believes that
Extending to record telephone and electronic firms will be impacted by the the approach taken by
MiFID II communications which relate to an proposed changes. The regulator the FCA is reasonable
requirements for agreement between the firm and the explains that some firms will be less and proportionate.
firms to record client. MiFID II introduced a similar affected than others due to existing
telephone obligation on an EU level and required taping requirements and will therefore
conversations or records to be kept for 5 years. The only incur familiarisation and gap
Date of issue: 26/06/18
www.gov.uk/rpc 3
Opinion: EANDCB validation
O rigin: d omestic
-
RPC reference number: RPC 4261/4262/4263/4264/4265/4267/4268/4269/4270 - FCA
Date of implementation: see table
electronic changes presented here extend analysis costs. It estimates these to
communications existing regulations to cover be one-off costs of £0.2 million. DIMs
discretionary investment managers who do not already tape, will incur
Implementation (DIMs), energy market participants one-off costs of installing the
date: 3rd (EMPs), oil market participants (OMPs), infrastructure and ongoing costs of
January 2018 and UK branches of third country firms. taping, storage, and conversation
retrieval. The FCA estimates costs
based on analysis from a previous
CBA which multiplies the increase in
yearly cost of storage per user by the
number of users and estimates
ongoing costs of £0.6 million from
year 5 onwards. On this basis, the
regulator estimates one-off costs of
between £2.5-£5 million and ongoing
costs of between £2.4-£4.7 million.
RPC-4264-FCA- MiFID II obligates firms to put in place The FCA explains that businesses The regulator has
Extending the arrangements and monitoring to make covered by the proposal include provided a proportionate
MiFID II best sure they are achieving best execution 2,439 financial advice firms and 81 level of evidence to
execution on behalf of their clients. More UCITS management companies. For support its assessment
requirements to specifically, MiFID II requires financial advice firms to read and of the measure. The
Article 3 retail investment firms that execute, transmit digest the changes and conduct gap FCA states that benefits
financial or place orders to: analysis to check their current to consumers are likely
advisers and practices against the new to exceed costs but
UCITS expectations, the regulator estimates does not include them
Date of issue: 26/06/18
www.gov.uk/rpc 4
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