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
  • Impact of Brexit on FCA inducements rules
  • 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
  • More...

FCA inducements rules

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 was replaced by the recast Markets in Financial Instruments Directive (Directive 2014/65/EU) (MiFID II Directive) and the EU Markets in Financial Instruments Regulation (Regulation (EU) 600/2014,OJ L 173, 12.6.2014) (EU MiFIR) (together the EU MiFID II framework). Both the MiFID II Directive and EU MiFIR entered into force on 2 July 2014. As amended, the majority of the EU MiFID II framework has applied since 3 January 2018, and EU Member States had until 3 July 2017 to transpose the provisions of MiFID II into national law. The MiFID II Directive and Commission Delegated Directive 2017/593/EU (the

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