IFAs and their clients are unlikely to notice the impact of the Distance Marketing Directive despite...
IFAs and their clients are unlikely to notice the impact of the Distance Marketing Directive despite tests proposed by the FSA in Consultation Paper 196 to determine whether contracts are done by "distance means".
The "literal simultaneous physical presence test", and the "meaningful simultaneous physical presence test" sound as if they should be on the top shelf of WH Smiths.
CP 196 suggests that they are the best way to distinguish between distance and non-distance marketing of financial services - the FSA prefers the latter method.
Both tests are designed to get round the tricky question of whether picking up a leaflet in a provider's or adviser's office constitutes distance marketing - the result of some grey interpretation of DMD rules, which pass into law by October next year.
Because the DMD applies across the European Economic Area, local regulators such as the FSA must put in place new local rules that enforce the Directive's rules.
Generally, however, IFAs should not be overly concerned.
"There will not be a distance contract where the customer acts on a face-to-face recommendation from a supplier or an adviser (be it in the customer's home or the firm's premises) about the product or service," CP 196 states.
Long-term the DMD will, of course, result in some changes to the availability of products in the retail market. The Directive means providers can sell directly across borders.
Consumers will get common rights across the EEA, such as 14- or 30-day cooling off periods in which contracts can be cancelled without penalty.
Some contracts, such as those involving collective investment schemes, or unit-linked life policies will not be covered by the new cancellation rules when entered into by "distance" means, the FSA says.
Responses to CP 196 must be in by 2 December this year, with a "Policy Statement" due by March or April next year outlining the new rules.
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