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...

FCA inducements rules

BREXIT: 11pm (GMT) on 31 December 2020 (‘IP completion day’) marked the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. Following IP completion day, key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see: Brexit and financial services: materials on the post-Brexit UK/EU regulatory regime.

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MiFID has been replaced by the recast Markets in Financial Instruments Directive (Directive 2014/65/EU) (MiFID II Directive) and the Markets in Financial Instruments Regulation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

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