Giving advice under the COBS/MiFID regime and principles-based regulation

With MiFID barely a couple of months old, we thought that we would benefit from a tour of the Directives and COBS rules on advising customers. Adam Samuel takes us on an excursion that perhaps lacks a little magic and mystery about it but is no less necessary for all that.

Adam Samuel Dip PFS, LLM, barrister and compliance consultant can be contacted on tel 020 7435 2620; email AdamSamuel@aol.com, website www.adamsamuel.co.uk. His book, “Complaints and Compensation: a Guide to the Financial Services Market”, is available from www.cityandfinancial.com and www.adamsamuel.com.

Since 1 November, advisory firms have been operating under a new regime. COBS implemented MiFID. It was not allowed to go further than the Directive. At the same time, it hoped to support the principles-based FSA agenda. Actually, MiFID itself is a powerful example of this principles approach. Article 19(1-4) & (7-8) of the 2004 Directive lays down the basic concepts about giving advice which the Implementing Directive tried to concrete in. The wordiness and poor organisation of the FSA efforts at giving effect to all this have spoilt much of the intended effect.