Financial advisers have been warned about the level of corporate hospitality they accept ahead of incoming stricter inducement rules under the European legislation Markets in Financial Instruments Directive II (MiFID II).
A study looking into adviser inducements, written by Professional Adviser's parent company Incisive Media, found one-third (34%) of advisers accept corporate hospitality without restriction, warning they will be the "low-hanging fruit" in the eyes of the Financial Conduct Authority (FCA) as the new rules come into effect.
The study of 89 independent and restricted advisers found they considered a football match event with a continuing professional development (CPD) component easier to accept than one without but, according to the FCA, this is not the case.
In its 2016 thematic review, the regulator stressed an event of this sort was not acceptable just because a professional development opportunity was bolted on.
The study also found that while three-quarters (76%) of advice businesses have guidelines around attending hospitality events with a CPD element, they were considered unclear in half of these cases.
The findings suggested advisers did not sufficiently understand the main provisions of the Bribery Act, MiFID I and the incoming MiFID II regulations.
This could explain why, according to the research, 22% of advisers reject corporate hospitality outright - which could be limiting.
The study said: "Given the educational and networking opportunities that corporate hospitality can bring to advisers (things which ultimately benefit their end client), a closed-door policy hardly seems the most enlightened approach."
'Time to focus'
Clifford Chance senior associate Caroline Dawson warned: "When the FCA conducts a thematic review on something then, if you haven't been paying attention up to that point, that is definitely the time to be focusing on it, because that is the point when they are really crystallising exactly what they are going to focus on when they come to take enforcement action.
"When they do start to focus on inducements, then the low hanging fruit - the easy enforcement actions - are going to be those people who have not complied with the existing guidance under MiFID I, so that is absolutely something for adviser firms to look at."
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