FCA inducements rules
FCA inducements rules

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • FCA inducements rules
  • Background to FCA inducements requirements
  • Prohibition on inducements
  • Rules on inducements for designate investment business other than MiFID II, equivalent third country or optional exemption business and IBIPs
  • Rules on inducements relating to the provision of investment services and ancillary services
  • Acceptable minor non-monetary benefits
  • The enhancement test
  • The disclosure obligation
  • The disclosure obligation in relation to MiFID and IBIP Business
  • The disclosure obligation in relation to Non‑MiFID and IBIP Designated Investment Business
  • More...

BREXIT: As of exit day (31 January 2020) the UK is no longer an EU Member State. However, in accordance with the Withdrawal Agreement, the UK has entered an implementation period, during which it continues to be subject to EU law. This has an impact on this Practice Note. For further guidance, see Practice Notes: The impact of Brexit on the MiFID II regime, Impact of Brexit: UCITS—quick guide and Impact of Brexit: Insurance distribution-quick guide.

Background to FCA inducements requirements

This Practice Note explains the Financial Conduct Authority's (FCA) rules on inducements (for example fees, commission or non-monetary benefits) including rules prohibiting inducements and exceptions to the prohibition.

The UK regulatory regime has always had prescriptive rules on the types of benefits that are payable in respect of dealings in retail investment products. Historically the FCA’s rules on inducements were primarily contained in chapter 2.3 of the FCA’s Conduct of Business Sourcebook (COBS) and implemented inducements requirements contained in:

  1. the Markets in Financial Instruments Directive (Directive 2004/39/EC) (MiFID)

  2. the MiFID implementing Directive (Commission Directive No. 2006/73/EC)

  3. the fourth Undertakings for Collective Investment in Transferable Securities Directive (Directive 2009/65/EU) (UCITS IV) and

  4. the UCITS IV Implementing Directive (Commission Directive 2010/43/EU)

MiFID has been replaced by the recast Markets in Financial Instruments Directive (Directive 2014/65/EU) (MiFID II Directive) and the Markets in Financial Instruments Regulation (Regulation

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