There have been definite signs recently that consumers have started to overcome their hesitations ov...
There have been definite signs recently that consumers have started to overcome their hesitations over transactions via the internet. Here, we shall explore some of the steps you need to take to ensure you are legally transacting online ' hopefully demonstrating that there is nothing to fear.
The good news is that if you are already authorised under the FSA to arrange investments or give investment advice, there is nothing extra from a FSA/regulatory perspective that you have to do to offer your customers the opportunity to contract with you directly via the internet. In this respect at least, the internet is not seen as any special medium.
It does, of course, carry with it certain other restrictions and challenges, and we shall now look at these in a little more detail.
The Electronic Commerce (EC Directive) Regulations 2002 came into force in August last year. They apply if you are established in the UK and carrying out any of the following:
• Selling or advertising services on the internet (including operating a website).
• Offering online information or adverts, or providing tools for search and retrieval of data.
• Providing services free of charge (including sponsored or funded by advertising).
The Regulations ensure that you have to provide certain information such as your name, address, email address, professional affiliations, supervisory bodies, clear prices and rules governing your activities in a way that is easily, directly and permanently accessible, just by virtue of the fact that you operate a website.
However, if you offer the capability of contracting online, you must also inform customers of the following:
• The steps necessary to conclude the contract.
• The means for correcting errors prior to placing an order.
• The languages available to conclude the contract.
• Any applicable codes of conduct, with electronic access.
They also require you to make any specific terms and conditions available so that your customers can store and reproduce them ' you can do this with a printed receipt. You must also acknowledge orders placed electronically without undue delay.
Perhaps the most important online requirement is that you ensure customers can identify and correct errors in any application or contract they are involved in ' if not, customers can cancel the contract.
Online applications will involve your customers divulging their personal details and you will therefore have to handle this information in accordance with the requirements of the Data Protection Act.
Furthermore, features that make the internet an ideal business channel also make it ideal for money laundering.
UK money laundering regulations require you to have identification and record-keeping procedures in place to prevent this. You are obliged to report any suspicious activity.
Other requirements that apply to financial service contracts will be introduced in the UK in 2004. You should familiarise yourself with these in due course. There is really nothing that should keep you from allowing customers to contract with you online. The legislative and regulatory framework can be negotiated with care, allowing you to reap the benefits.
James Mitchell, from Maclay Murray & Spens
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