A few weeks ago, the FSA published a consultation (CP08/03) that tackles the stop gap measure introduced in the middle of last year.

Just to take you back to last summer, when the FSA issued their thoughts on MiFID (Markets in Financial Instruments Directive), a pan-european directive on retail investment transactions, they wanted to retain their approach on the initial disclosure regime and also the Menu – a document designed to give the consumer information about average costs and remuneration for products.

The EU rejected the FSA’s approach calling the plans ‘gold-plated’ with significant overlap on the MiFID directive. The FSA responded by rolling the current rules beyond the MiFID implementation deadline of November 2007.

CP08/03 tackles the changes the FSA feel is more aligned to the MiFID sentiments and consults on a new set of guidelines, comprising (at a high level):

- The creation of new document for consumer use: ‘Services costs and disclosure document’
- The integration of the Initial Disclosure Document (IDD) and Menu
- The new document will be less prescriptive, allowing more free text to be inserted by the product provider
- The removal of mandated data, eg market averages, maximum commission etc.

The FSA point out they expect the rules to be bounded within Conduct of Business Sourcebook (COBS). They also state that the proposed rules might well be changed as a result of the responses to the consultation on the Retail Distribution Review (RDR).

On the face of it, it looks to be a sensible approach and certainly there will be few who will mourn the demise of the Menu.

For those who feel the need, the consultation ends 19th May, with a view to publishing the Policy Statement in July and the Rules in August 2008.

A quick thought before the Easter break.

Without wishing to stray into confidential commercial territory, we have noticed an increasingly competitive pressure on the pricing of e-commerce (front and back-office – Mortgage and L&P) solutions. This has been noticeable over the last 12 months and would seem to be influenced by the fact that there are more suppliers competing for the same business, added to which there is a lower comparative price point for what are typically ‘mortgage’ related solutions. The latter pricing appears to be pulling down the price of L&P solutions as they each seem to be moving horizontally into the other’s market space. This is in spite of the scope and functionality of L&P solutions usually being greater.

The question is whether or not it is a good or bad thing… Well, I suppose it depends on who you ask. On the face of it suppliers would say it’s bad, whereas customers may say it’s good. However, I wonder if this is pricing pressure is potentially damaging for both parties! With tighter margins or even potential loss making deals, some of the suppliers may not have the motivation or reserves to survive. A weakened supplier may be less able, or unwilling to ‘go the extra mile’ for customers, or even have to withdraw from the market leaving some customers exposed – short term gain for long term pain. Procurement and negotiation is more than about getting the lowest price and both parties should be working for a ‘win win’ scenario.

The regulator faces a similar dilemma to weather forecasters at the moment. The latter have a problem with their warnings being taken seriously…from the initial attention that these warnings got at the weekend, people seem to be less concerned and so may not heed well intentioned advice. Ironically, having a real ‘disaster’ is what usually focuses the attention of the public and so it is likely to be with TCF.

The FSA have been warning that the respective March and December deadlines need to be taken seriously and that they have so far found a rather lax attitude among a proportion of the industry and this is not just advisers. Based on past experience of the regulator where their initial warnings were akin to using ‘carpet slippers’, they quickly moved onto using ‘Doc Martens’ with a range of penalties, including fines, suspension and re-selling – all very expensive and damaging to brand and reputation! In order to heighten the attention of the industry, this year could well be when the ‘Doc Martens’ get used. Indeed, whilst targeting a high profile business in this way could have disastrous implications on that particular operation, it is likely that it would serve as a wake up call to others.

Businesses should ask themselves what would happen if the regulator paid them a surprise visit tomorrow morning, i.e. are you ready now, not could you be if you had a couple of weeks notice!