The Treasury has confirmed the RDR will not impact upon the ability of firms based in Europe to advise clients in the UK, although it insists the use of passporting to evade regulation will not be permitted.
In a written question, Liberal Democrat peer Lord Dykes asked the government what discussions it had had with the European Commission on adviser firms registered in other European countries transferring into the UK and providing financial advice without having to comply fully with the requirements of RDR.
Lord Sassoon, commercial secretary to the Treasury, replied: "The European Union's passporting criteria, which govern the ability of firms to offer services outside their home member states, are not affected by the RDR.
"Where a firm passports into the UK, it will be subject to the regulations of its home state.
"However, a firm will not be permitted to operate on a cross-border services basis in the UK if it is doing so for the purpose of evading standards."
The FSA has previously reiterated this stance, confirming the rights of advisers under existing legislation but insisting it cannot be used as a way of avoiding RDR.
However, Simon Mansell of Temple Bar IFA, who has previously received a response from the European Commission on the issue, believes the FSA will not have the power to intervene in such cases.
He says: "The FSA has a thing called statutory authority which puts it above the law and above the courts in this country.
"However, it does not have any authority over Europe as that is the highest court.
"It could be that we are sitting on a large exodus in the near future."
Although he plans to stay regulated in the UK and meet the requirements of RDR, Mansell believes the industry could see a large number of advisers form ties with European firms or join European networks.
He says: "If you are an adviser that fails to qualify at level four and you are being told your capital adequacy is going up to £20,000, it might not be a question of whether you will or won't, you might not have any choice."
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