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FCA passes new rules for platforms

Chris Hamblin, Editor, London, 31 January 2020

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The British Financial Conduct Authority has enacted new rules that are of interest to platform service providers, financial advisors and fund managers and their service providers. The rules, it hopes, will make it easier for HNWs to move assets from one platform to another without liquidating those assets.

The FCA expects fund managers to collaborate with platforms and be flexible in providing appropriate information and access to unit classes for transferring consumers.

In March last year, the FCA proposed to change its rules to make it easier for consumers to transfer their assets from one platform to another. It canvassed opinion about this as part of a wider strategy that sprang from its Investment Platforms Market Study (IPMS), which found that competition in this market was limited by the barriers facing consumers when they tried to switch platforms. Policy Statement 19/29 contains the rules that give effect to its policy. Nothing from the consultative process has given the FCA occasion to change a single proposal.

According to new rule 6.1H.3 R, if a retail client contacts a platform service provider in connection with a potential transfer of his investment which includes units, the provider must:

  • offer him the choice of an in-specie transfer of units in an available scheme, as long as there are no circumstances outside the control of either the ceding or the receiving platform which would prevent it;
  • give him the option of, as part of the transfer, converting the units in an available scheme into units of a discounted unit class, as long as such units are available through the receiving platform; and
  • give him enough information on time.

New rule 6.1H.4 R says that if the client instructs the platform service provider to proceed with a transfer of units, then:

  • the ceding and receiving platforms must take all reasonable steps to do it quickly and well (a proviso that strikes the reader as pure regulatory bluster);
  • if the client has chosen an in-specie transfer and a unit class conversion is required to effect it, the ceding platform must ask the fund manager to carry out the relevant unit class conversion; and
  • if the client has chosen a discounted unit class, the receiving platform must ask the fund manager to convert the units into it.

An in-specie transfer is a transfer of the client’s units which happens through a re-registration of the ownership of the units, whether or not the transfer also involves a unit class conversion but in any event without the fund manager redeeming the existing units.

The FCA hopes that this will allow the HNW customer to avoid unnecessary risks or costs from temporary disinvestment when he moves between platforms but stays in the same fund and will also help him make better-informed decisions when a discounted unit class is available. The rules that it is changing lie in its Conduct of Business sourcebook, which is a part of its larger rulebook.

The new rules will come into force on 31 July 2020.

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