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Post Brexit, should legitimate client entertainment continue to be an “illegal inducement” for FCA regulated firms?


By admin | November 6, 2018 | Category Services offered by Hannaford Associates, Training offered by Hannaford Associates

Post Brexit, should the hurdle for client entertainment for FCA regulated Financial Services firms currently also under EU MiFID II continue to be higher than it is under the UK Bribery Act where client entertainment is concerned? The Bribery Act is perfectly clear and applies to all UK “persons”. Under EU MiFID 2, UK Financial Services firms are also bound by  “Inducement” rules which impede normal and perfectly legitimate client entertainment by FCA regulated companies in the UK putting them at a disadvantage to other businesses.

Under EU MiFID 2 rules an “inducement” is illegal and therefore can only be a bribe. Under most English dictionaries the interpretation of the word “inducement” does not have to be a bribe although it can be.

For UK financial service firms that do not need EU regulatory “equivalence”, and there will be many who will not do business in the EU, EU MiFID 2 inducement rules are just one example of what should come under pressure for reform post Brexit in the UK should they be impacted into UK law on departure.

In the world class and highly developed corporate finance community in London and the UK which is well in advance of anything in the EU, the aim of client entertainment is often to introduce a corporate client wishing to raise investment to different institutional investors often loosely referred to as the “buy-side”.

For FCA regulated firms EU MiFID 2 inducement rules impede this process by disallowing  the receipt of any form of material client entertainment by the buy side. This makes it more difficult for a perfectly legitimate process of business introduction between a business and a potential investor to take place at all. It does seem rather unfair that these buy-side firms are under a much greater regulatory scrutiny than others in the economy.

In contradiction Ken Clarke said of the UK Bribery Act: ‘The guidance must make it absolutely clear that ordinary, legitimate promotion – hospitality and similar activities in which people engage in order to project the quality of their company and its products or services, and to establish personal relationships with clients and customers – is all part of international trade.’

Hannaford Associates gives detailed advice and training on how UK financial firms can deal with these  rules as they stand now, no matter how unfair and in need of reform they may seem.

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  • Consulting and Training
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  • What we think
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Categories

  • Services offered by Hannaford Associates
  • The benefits of Workflow
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  • Uncategorized

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