European Federation of Financial Advisers and Financial Intermediaries (FECIF)

N/A
We generally agree with the principles laid out by EBA in the discussion paper however:
1. If the failure of an investment firm is going to have an impact on customers, this very much depends on the type of services that are provided: the failure of an investment firm that provide “know-how” type service (information and advice) has very little if no impact on the customer as the assets are deposited with a third party.
In the case of the failure of a “know-how” providing firm, the customer may just select another firm.
Only one known actual risk for the customer may justify a minimum capital requirement. It means that if there is no or a very limited risk for the customer, the capital requirement must be minimal.
2. The capital requirement must depend on the risk involved: an investment firm which does not provide a credit facility to customers does not need to calculate a non-existent “credit risk”; the high cost related to calculating a potential risk creates an unnecessary burden and a subsequent additional cost to the investment firm and its customers.
We generally agree with the considerations regarding the identification of very small investment firms subject to:
1. In the case of quantitative criteria € 50,000,000 turnover
2. The turnover realised by tied agents should be included in the total calculation
Generally, one should not confuse small firms with large multinational institutions.
We agree on all points except points “i” and “j” as they are irrelevant in our opinion, with a potential risk to customers.
Advisers should be separated from investment firms: the key issue is the customers’ assets/holding.
An adviser provides advice, he/she does not manage money.
However, in some Member States, collecting a cheque for an investment firm requires best execution" licensing, a stamp machine to record the time between collection and investment. As an adviser does not have the power to influence the execution process, nor even the postal or any other transmission process, this is a perfect example of overregulation."
As a matter of example, “unsuitable advice” could be covered by appropriate professional indemnity insurance.
N/A
N/A
N/A
N/A
This is just good common sense.
N/A
The legal status of an investment firm does not affect the accounts – reserves and provision; so irrelevant in our opinion.
N/A
N/A
N/A
N/A
We disagree with any minimum share capital increase as much as we would welcome simplification of the rules.

An amount of € 50,000 is a fair amount as initial capital; a firm providing only “know-how” services does not need a minimum capital requirement unless the ultimate goal is to prevent small firms from operating in a world with consolidation at any cost (unemployment etc).

Similarly, an insurance guarantee should suffice for firms that only receive/transmit orders and advice; there is very limited risk for the customer; professional indemnity insurance offers protection and is often better security for a customer than a minimum capital requirement.

We find the possibility of removing reduced initial capital for investment firms that are also insurance intermediaries and which have IMD/IDD PI cover is discriminatory. As long as this PI cover covers both activities, the same reasoning as mentioned above can apply, meaning that no capital requirement would be appropriate.
N/A
N/A
N/A
N/A
N/A
The final say should be with the customer and not with the regulator.
Strict monitoring of customer’s instructions and regular review of such instructions.
It may be highly counterproductive, affecting the firm’s strategy and philosophy; such disclosure should be restricted to customers and regulators only and not for communication to the public at large.
N/A
N/A
To avoid doing what has been done over the last few years and keep to the essentials and the principles: it will assist the customer to obtain the best deal and also to get the appropriate redress in the event something goes wrong. An excess of rules creates legal uncertainty for the industry and for the public.
Guidelines are enough to supervise.
N/A to most advisers for the time being.
N/A
External auditors/members of the board should be held accountable, including top management remunerated on a salary basis.
N/A
N/A
Proportionality must be the rule and not the exception: “one size does not fit all” so a separate rule and a simplified regime will assist the industry and better serve the customers.
N/A
Paul Stanfield
E