The draft Markets in Financial Instruments Directive II (MiFID II) published today limits the ban on receiving commission payments from product providers to independent financial advisers.
The paper is at the Level 1 stage of being drafted and will now go out to the governments of the 27 member states for further negotiation. It will then need to be passed by the European Commission and adopted by the European Parliament.
If implemented in their current form, the rules would seem to allow restricted advisers to escape from the Financial Services Authority's changes to the adviser charging rules under RDR, which ban commission payments in favour of fees and are due to come into force in January 2013.
However, Peter Snowdon, partner at law firm Norton Rose, said the draft rules will be subject to fierce wranglings by member states, including the UK.
"Could MiFID II steal the RDR's thunder? Potentially but I think there is still much political negotiation ahead on this point," he said.
Today's paper stated: "In order to strengthen the protection of investors and increase clarity to clients as to the service they receive, it is appropriate to further restrict the possibility for firms to accept or receive inducements from third parties, and particularly from issuers or product providers, when providing the service of investment advice on an independent basis and the service of portfolio management."
In such cases, only limited "non-monetary benefits" such as training on the features of the products should be allowed subject to the condition that they do not impair the ability of investment firms to pursue the best interest of their clients, the paper continued.
The draft rules are in stark contrast to the FSA's hardline approach to a total ban on commission payments for all advisers.
An FSA spokesperson said: "We welcome the Commissions' work on the update of MiFID and the aim of improving investor protection."
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