In its 2015 thematic review, published on Monday, about benefits provided and received by firms falling under the Markets in Financial Instruments Directive (MiFID) rules, the FCA said that attending events such as concerts, golf and tennis events, were not always in the client’s best interest.
The update comes off the back of the FCA’s finalised guidance on inducements released in January 2014 and has been published “to remind firms of our expectations around the current rules”, said the regulator.
It highlights instances where investment firms are offering compliant services like educational conferences in conjunction with hospitality events – such as playing golf and evening dinners – that are considered non-compliant.
Non-monetary value
The FCA said: “Just because one benefit provided by the firm is designed to enhance the quality of service to a client and is capable of being paid or received without breaching the client’s best interest rule does not mean that another benefit (that does not meet these requirements) can be included in or alongside the compliant activity or event.”
The body has urged advisers to assess the value of non-monetary benefits to the client and whether the nature or venue or certain activities are appropriate for business meetings.
The review also criticised how hospitality logs kept by firms did not always record relevant detail or were not always well maintained – a practice the FCA previously mandated to ensure effective monitoring and compliance.
Furthermore, the regulator said that although investment firms were now disclosing the nature of the benefits they provided to advisers, such as training, they were still failing to reveal the value of the benefits, which the FCA describes as “essential” for allowing advisers to decide whether they wanted to go ahead with the investment or seek more detailed information.
