Swedish Financial Supervisory Authority to consider commission ban
Commission paid by providers in the fund industry in Sweden may be banned under proposals put forward in the conclusion of a major inquiry into the country’s securities industry, which started its work in 2013 and which has now reported its findings to the minister for Financial Markets Per Bolund.
The inquiry has produced a two-part document of its findings titled Värdepappersmarknaden, MiFID II och MiFIR – which effectively translates as “The securities market, MiFID II and MiFIR” – in which it has considered the relevant changes in Swedish law required to push through implementation of the Directive and Regulation at the national level.
Part of this work also included mapping out and analysing certain questions affecting financial advice, which hitherto have not been bound up in any particular regulatory requirements, as well considering whether such advice should be regulated by local law.
As the inquiry report notes: “It can be added that among the changes to the Insurance Mediation Directive, which follows from article 91 of MiFID II, there is a decision that member states are allowed to introduce a ban on commission – see the new article 13.d.3, which has been introduced through article 91 of MiFID II.”
Much of the financial advice provided in Sweden is done so by persons who technically are regulated as insurance brokers, and therefore fall under the scope of IMD rules. The ongoing failure of Brussels to coordinate more exactly the timetables of changes to IMD and those piece of legislation affecting more investment specific activities has therefore been a source of concern among Swedish financial institutions.
Reacting to the inquiry conclusions, the Swedish Investment Fund Association said that in its opinion, the gist of the proposals for banning commission would be to affect financial advice given to consumers.
Any ban would target up front commission, although there may be some flexibility for allowing independent advisers to pass any commission on to their customers to avoid conflicts of interest – something that certain independent advisers already do today, the Association noted.
“Of course advice that is not in the interests of the investor should not be allowed. Good advice is to be encouraged. We are pleased that it has been clarified that commission may be offered for distribution of funds through supermarkets and platforms. It is a necessity that fund companies should be able to pay for distribution in future so that all investors will have access to a broad range of funds,” said Association CEO Pia Nilsson.
Following the publication of the government inquiry, responsibility for interpreting the regulations and deciding what type of advice is in the best interests of investors will now pass to the Swedish Financial Supervisory Authority (FI) . This is in context of a recent survey from TNS Sifo Prospera, which suggested that some 54% of respondents said they had chosen their funds following financial advice. The Fund Association added that its figures suggest 76% of Sweden’s population is invested in funds.
Nilsson said that FI now carried great responsibility to implement regulations that would ensure even those investing relatively small sums would continue to have access to financial advice.