HM Treasury published its response to its late 2016 consultation on amending the definition of regulated advice under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to bring it in line with the definition of "investment advice" set out in the Markets in Financial Instruments Directive. HMT is proceeding with the change as consulted on and will lay draft legislation before Parliament to give effect to the change. The Financial Conduct Authority published a statement about the change, setting out what the change will mean for firms advising on investments or providing a personal recommendation. Regulated firms will only be considered to be giving advice when they provide a personal recommendation to a customer. Therefore, regulated firms will be exempt from the need to hold a permission to advise on investments unless the firm is providing a personal recommendation. For regulated firms that only hold permissions for advising on investments or for agreeing to advise on investments, there will be no change.

However, the existing definition of investment advice for unregulated firms will be retained to combat the risk of fraudsters attempting to deliver "advice" that although does not constitute a personal recommendation is intended to persuade an individual to purchase risky investment products.

The change follows the Financial Advice Market Review's recommendation that HMT should consult on amending the definition of regulated advice in accordance with the MiFID definition, to the effect that only advice which makes a personal recommendation is regulated. The new definition will come into effect on January 3, 2018 such that the change takes place at the same time that MiFID II comes into force. The FCA is expected to consult on and publish new guidance before the end of 2017.

View the response.

View the FCA's guidance statement.