The Financial Conduct Authority (FCA) has outlined the scenarios in which the payment of cash rebates from providers to consumers can continue after a wider ban comes into force next year.
Earlier this year, the regulator confirmed a ban on cash rebates to retail clients of both advised and non-advised platforms on new business from April 2014, though rebates up to £1 or in the form of additional units would be permitted to continue.
But a number of stakeholders requested to know what effect the ban would have on legacy business.
In its latest quarterly consultation paper, the FCA outlined the proposed cases in which these payments could continue.
They may continue when:
a) no change is made to the retail client's investment in the relevant product or to the level of the retail client's regular contributions into that product;
(b) the retail client's investment in, or regular contribution to, the relevant product is reduced; the retail investment product provider may continue to pay the cash rebate associated with the reduced investment amount;
(c) the retail client's investment in the relevant product is transferred from accumulation units to income units or vice versa;
(d) part of the retail client's investment is switched between funds within a retail investment product such as a SIPP or a retail investment product wrapper such as an individual savings account (ISA); the retail investment product provider may continue to pay the cash rebate associated with the part of the retail client's investment which has not been switched into another fund;
(e) the product is re-registered to another platform service provider, and is otherwise unchanged;
(f) the product is converted to a share class which does not pay a commission, remuneration or benefit of any kind to a firm and is otherwise unchange.
The cash rebate ban was announced at the same time as an additional ban on some payments from product providers to platforms, which the regulator argued could lead to product bias and restrict competition.
But, whereas the FCA made clear a number of exemptions of when other payments between providers and platforms may continue - such as, controversially, payments for marketing - it did not do so for the ban on provider-to-consumer cash rebates.
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