SRI related regulation & consultations

The following information points to some key relevant areas for the UK financial advisory community with an interest in sustainable, responsible and ethical investment.  (This is not intended to represent a comprehensive guide to legislative requirements or best practice!)

 

FCA June 2017 FAMR/ Asset Management Market Study Final Reporthere   (For references to ESG/Stewardship see p19, p20, p79)

EU PRIIPS  consultation – respond by March 2017 via this link

Law Commission consultation on social investment and DC pension schemes Nov 2016 (See blog for responses).  LC to report May 2017

 

The Pensions Regulator –  Guide to Investment Governance for pension trustees July 2016

FCA consultation paper on Social Impact Investment  2015/6

The information below is now a few years old.

We are advised that the situation remains effectively unchanged however advisers may like to see  COBS 6.2A 1-22 or elsewhere for more up to date regulatory information.*

 —

FG12/15

Below are some brief bullet points indicating the main SRI related advice issues that became clear to sriServices following an analysis of the FSA paper FG12/15, which is now available via the link above.

Please see the ‘Advising on SRI’ page for  additional information and links.  The text below is lifted from a longer  analysis of FG12/15: FSA Finalised Guidance paper June 2012, “Retail Distribution Review: Independent and restricted advice” – which is available via commentary style our pdf.

Key SRI related points:

• Investment needs and objectives must be assessed on an individual basis so it will be rare that independent advisers will be able to rule out entire product areas – even if they specialise. (2.7)

• Advice must be fair, comprehensive, unbiased and unrestricted. (2.14)

• Advice on retail investment products must relate to clients’ needs (2.15) – not adviser processes or tools.

• Panels need to be sufficiently wide to enable advice to be comprehensive and fair (5.4).

• Advisers who use panels should be able to go ‘off panel’ for areas such as ethical/SRI investment to find funds that meet clients’ needs. (5.5 specifically references ethical/SRI)

• Platforms and model portfolios are viewed similarly to panels. If an adviser’s regular platform or portfolio solution does not meet the needs of an individual client – the adviser must look for alternative solutions that meet the needs of that specific client (to meet the ‘…comprehensive and fair analysis of relevant product markets’ rules – 5.6, 5.7, 5.12).

• If an adviser can identify a common market across all their clients (and market themselves as specialising in that area) they may be able to exclude certain retail investment products from the advice process (2.8)

• Common relevant markets are likely to be few in number but as well as ethical/SRI clients (explained in 2.6) this could include ‘Islamic Finance and charities and trusts (and annuities)’ (2.13 refers specifically to these latter three areas)

• Independent advisers can restrict themselves to only offering ethical / SRI products to clients who identify themselves as only being interested in that market. (2.6, 2.12 both specifically mention ethical/SRI) .

(The text above is lifted from a longer document which is available via our ‘Literature’ Page.)

===

* The updated FCA text is less clear with regard to ethical investment & SRI however the principles of  ‘treating customers fairly’, ‘know your customer’ and being ‘true, fair and unbiased’ remain.

 

 

This information is for use by UK professional financial advisers only. SRI Services is not authorised to give investment advice, if you are an individual investor you can find an IFA on www.unbiased.co.uk. The information on this site does not in any way constitute advice or recommendation. The information and tools are intended to compliment, not replace existing adviser information sources. Investment decisions should not be based on the information contained on this site alone. Please confirm fund information with fund managers. We cannot be held in responsible for advice given as a result of using this site and are not responsible for the content of sites linked to this service, we do however of course take every effort to ensure the content of this site is as accurate as possible at time of publication.