The document provides an overview of the Financial Services Authority's (FSA) consultation on platform services, focusing on issues such as provider payments, cash rebates, and the responsibilities of advisers when using platforms. Key proposals include a ban on cash rebates and payments to platforms, emphasizing clarity for consumers regarding service charges while recognizing the need for further research before final rules are established. Additionally, it discusses the FSA's stance on re-registration processes, capital adequacy standards, and information dissemination, highlighting the complexities and evolving nature of the platform market in UK financial services.

1. Platforms of Glass?
The FSA and Platforms
The FSA have provided consolidated feedback on the proposals for Platforms
and their use, disclosure, provider payments and cash back to consumers.
Where do your thoughts take you on this emotive subject?
Lee Werrell
CEI Compliance Limited

2. Platforms of Glass?
The FSA produced a consultation paper CP10/29 (innovatively entitled “Platforms: Delivering
the RDR and other issues for platforms and nominee-related services”), the proposals in this
paper took into account feedback on the options set out in the initial Discussion Paper DP
10/2 entitled “Platforms: Delivering the RDR and other issues”.
There was some degree of support for the majority of proposals even though the FSA had,
as appropriate, made amendments to recognise the concerns of industry. Typically the
most controversial issues were payments by providers to platforms, and cash rebates by
platforms to consumers. The position on these points is set out in this, their latest paper.
The thrust of the paper
The PS covers the issues of defining a platform and distributing products through a platform,
which also includes the definition of platform service and what the FSA expects of advisers
when using a platform.
The FSA state that “As it is the adviser that is providing advice, the suitability rules apply to
the adviser and they need to ensure the fund they are recommending is suitable for their
client." The FSA added that platform providers could decide what funds to distribute and
were not required to hold or refuse to hold any particular funds.
A spokesman for the FSA was quoted as saying that platforms were under no obligation to
disclose regulatory action taken against any funds offered. Ascentric had taken this stance
independently; they had published details of the regulatory concerns regarding Castlestone
on its adviser website but has not stopped investments.
In what was probably the most contentious part, the FSA has laid out their proposals on
payments to platforms and consumers, on how platforms are paid and the Adviser Charging-
related issue of rebating product charges to consumers. In respect of incentives, the FSA has
decided that it would be desirable, in principle, to ban both cash rebates from product
providers to investors and product provider payments to platforms. However, given the
potential impact of these changes on the business models of platform service providers, the

3. FSA has concluded that further research is needed to ensure that the implications for
consumers are fully understood before proposing new rules.
Sheila Nicoll, the FSA’s director of conduct policy said that; “The rules published today are
designed to enable consumers to understand the services they are being offered by
investment firms, and what they are paying for.
“With more and more business
being conducted through
platforms, it is important that
customers are clear who is
charging for what, and for what
service. It is also important that
customers and their advisers
can move their investments
quickly and easily, particularly if
they are dissatisfied with the
service they receive.
“We also believe that it is likely to be in the best interests of consumers that product
provider’ payments to platforms and cash rebates from product providers to investors
should be banned. But we need to analyse the impact on consumers and on firms’ business
models before we propose any new rules.”
Reregistration
Two areas that the FSA were looking at regarding re-registration were in specie registration
for all nominee companies and that re-registration is done in a timely manner
There were no major issues or objection in these areas and on the matter of timeliness,
there is a Tax Incentivised Savings Association (TISA) initiative that the FSA is supporting and
so it may well be prudent to await their proposals to determine whether prescriptive rules
are required.
Capital Adequacy
In a common sense move, the FSA has adopted the same capital adequacy standards as for
Limited Licence Investment Firms (LLIFs) which is simply
the minimum capital resource requirements being the
higher of:
• the base requirement; or
• the sum of credit risk, market risk and FOR.
The 'limited activity' categorisation may be available to
those firms that do trade on their own account and whose
permissions ensure that they meet the requirements of
BIPRU 1.1.27.

4. Nominee Accounts
Lastly the investing through platforms for nominee accounts demonstrates concern that
customers may be disadvantaged in not receiving important information from Platforms and
other nominee companies on authorised fund investments. This information could be short-
term fund reports, accounts, notice of changes affecting the fund etc and even though the
concern was largely focused on Platform operators, it could also include ISA and SIPP
providers too.
A definition of ‘intermediate unit-holder’ has been created for a firm that is named on the
unit-holder register but is not the beneficial holder of the units. This could, technically have
also included Discretionary Investment Managers but the FSA has clarified that it is not
there intention to do so.
It has been deemed necessary for the
intermediate unit-holder to forward certain
documents and notifications that they receive
from an authorised fund manager and this should
be done in a timely manner. In recognition of the
administration effort and cost, the FSA is looking
to allow firms to use e-mail, secure messaging and
hyperlinks to document libraries for customers to
access relevant information.
The FSA has also provided guidance on the timing
an frequency of providing information – eg three monthly, quarterly and six monthly
depending on what it is.
So what is the meaning of all this?
Undoubtedly this is a progressive document and clarifies a number of areas of the FSA’s
thinking and proposals on Platform related issues. Unfortunately there are also a number of
unresolved key items and a few more new views introduced. In usual fashion these will take
further time and effort to assess and consult upon before final rules can be promulgated.
There are also areas that will remain open to interpretation and the reality is that ambiguity
carries risk. Potentially trying to please too many people could be a disadvantage to the end
customer. One area is clear and that the adviser is responsible for assessing suitability of a
product distributed through a platform, and this then leads onto the discussion that a single
platform offered by an IFA may not be totally suitable and comparisons may need to be
made.
What has to be remembered is that the Platform market is
an evolving and dynamic aspect of UK Financial Services that
can be of benefit to the customer and it can also present a
risk to the adviser and consumer if mis-managed at any time.
Additional costs by Platforms in meeting the suggested
standards of information dissemination may make all but

5. they very large platforms uncompetitive and ultimately collapse. Large Platforms will still
have their challenges in finding scalable systems and controls around their data distribution
and evidencing that they have complied. Ultimately, being totally definitive is onerous and
often unpopular so it is impossible to please all of the people all of the time.
Oh, and by the way, the new rules will be implemented on 31 December 2012.
Companies we have been involved with in the last 10 years;
CEI Compliance can help provide a full compliance support service, reducing
required management time, ensuring all areas are up to date and working for your
firm’s long term benefit. Call 0800 689 9 689 today or go online at
www.ceicompliance.co.uk
This whitepaper was written
by Lee Werrell FInstSMM Chartered MCSI
Cert PFS, founder of CEI Compliance Limited.
Avoid S166 Skilled Persons Reports –
download our free guide here

6. How to Choose a Compliance Consultant
(Acknowledgements to Alan Weiss, www.summitconsulting.com)
Every financial services business occasionally needs outside help. Even well-run giants such as RBS, Lloyds,
Aviva, Barclaycard, and many other firms deliberately choose to bring in compliance consultants on a regular
basis. For smaller businesses, an outside consultant can offer the following advantages:
 Objective advice, not geared toward political advancement or promotion
 Frame of reference and best practices from other clients
 Models and methodology to gain results more quickly than internal trial and error
 Permanent transfer of skills to internal people The problem, however, is that those external
consultancies can create as many problems as they solve. (One definition of a consultant: someone
who comes to fix a problem and remains to become a part of it.)
These include:
 Threatening employees by the mere presence of an “outsider”
 Reliance on “off-the-shelf” fixed methods which don’t fit the current client very well
 Lack of sensitivity to the client’s business, culture, and environment (a financial adviser practice is not
run the same way as an accountancy practice)
 Solutions that worked for large organisations cannot always be simply scaled down
 “Ideal” solutions not really practical for the client’s business and have limited or no real value
I’ve been in consulting since 2000 and, to my astonishment, I find currently that about 50% of those calling
themselves “consultants” don’t really know what they’re doing, but what is worse is that almost 90% of those
buying consulting services don’t know how to tell the difference! To remedy that, here is a primer on how to
hire the best possible consultant for your needs:
A good consultant frames an issue quickly but doesn’t suggest solutions too quickly, because they realise that
they don’t know what they don’t know until they begin to gather more data.
A good consultant will not promise the moon and the stars, and will never base an approach on tests or
instruments that are purchased for a few pounds from other companies. (You get what you pay for.)
A good consultant is someone you’ll hate to see go when the project ends on time, and who you’ll want to
invite back at the first appropriate new challenge.
CEI COMPLIANCE works on an alternative basis by collaboration and does not charge per hour, day or week.
Call CEI on 0800 689 9 689 to make your first appointment.