SRA consults on financial adviser rules
31 July 2012
The Solicitors Regulation Authority (SRA) has launched its consultation on the rules governing how solicitors work with financial advisers.
Views are sought from all interested parties on three options the SRA has drawn up to deal with both changes to the regulations of the Financial Services Authority (FSA) and the SRA's own new outcomes-focused regime.
The SRA's Board approved the proposal to consult, with the exercise running until 10 September 2012. FSA regulations on advisers are due to change at the end of the year. Solicitors often refer clients to these advisers to provide financial services, and provisions in the SRA Code of Conduct lay out the rules for these instances.
With the FSA Code changing, the SRA Code needs to change too, and the consultation will look at options for amending the duties expressed as outcomes in chapter 6. The SRA also needs to ensure that best outcomes for clients are achieved and there is a risk that only allowing solicitors to refer to those advisers deemed "independent" might be contrary to that aim.
Agnieszka Scott, SRA Financial Regulation Policy Manager, said: "In outcomes-focused regulation, the solicitor should make a judgement as to what is in the best interest of the client. Changes in the financial market and the definition of advisors means an advisor could not be classed as independent but still provide the client with the relevant choice of financial options.
"Solicitors, as highly qualified professionals, should be free to assess and discuss clients' needs, not be restricted by a prescriptive rule. It's one of the reasons that we're consulting on three options available to us, and we'd like as many people as possible to provide their views to us."
The options listed in the consultation are:
Keep Outcome (6.3) but alter the language to remove reference to “independent intermediary” and replace it with wording to reflect the terminology contained in the FSA’s Retail Distribution Review
Remove Outcome (6.3) from the SRA Code of Conduct, and to add a new Indicative Behaviour (6.3) which describes referral to an independent adviser
Amend Outcome (6.3) so that clients are in position a position to make informed decisions about referrals in respect of investment advice
Option 3 is the SRA's provisional preference for the following reasons:
It supports outcomes-focused regulation as it does not prescribe how the outcome must be achieved
It reflects the possibility that under the new regime introduced through the FSA’s Retail Distribution Review, many firms which are currently described as independent financial advisers or independent intermediaries may not be able to label their advice as independent because they will not, for example, advise on a sufficiently broad product range meaning that in the absence of the changes suggested under option 3, the lawyer would be unable to recommend them to their client
It means that the lawyer must ensure that the client understands the implications of a particular recommendation
It ensures that the client is involved in the decision-making process
It removes restrictions of customer choice, if seeking financial advice referral through a solicitor
The consultation is available here:
Go to the consultation