MiFID could lead to 'proactive' compensation

Changes to the Financial Services Authority’s Conduct of Business rules, known as NEWCOB, could require companies – including IFAs – to offer compensation to clients on a proactive basis, claims Reynolds Porter Chamberlain.

The law firm says the FSA is using the Markets in Financial Instruments Directive (MiFID), which comes into force on 1 November, as an excuse to rewrite both the COB Dispute Resolution Rules which cover all financial services business, even though many – such as IFAs and insurance brokers – are not covered by the EU Directive.

Jonathan Davies, partner at RPC, says the new dispute resolution rules could see many companies being required to offer compensation on a proactive basis once they become aware of a recurring problem, while at the moment they can wait until a customer complains.

He adds: “This institutionalises the Pensions Review. This will be a costly exercise that will inevitably hit the pockets of customers by pushing up the price of financial products.”

Read the full article by Nyree Stewart (ifaonline.co.uk).


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