First consultation with Advisor

[Dan Murray]

Quick initial question, is the re-imbursement of commission to clients allowed under the Consumer Protection Code?
Without re-reading the code, I cannot remember reading that it is not allowed. It should be declared to the Revenue as income. That is the clients responsibility, not the advisors.

Steven

I had hoped for a detailed answer to my queries. Ok, just kidding!!, thanks again for taking the trouble to provide such a detailed response.
I will review again your full post in more detail later.

Just one point for now - my understanding from an adviser that I was dealing with is that he simply was prohibited from returning commissions to me (his client). In correspondence I received from this adviser, it stated: Under the Consumer Protection Code, I am prohibited from paying or sharing a fee or commission in respect of regulated financial services to individuals or entities (unless those individuals or entities are also regulated financial services providers themselves).

So - can anyone clarify this? Can commission be rebated to a client or not? [I appreciate that the Revenue should be made aware of commission rebates].

 

[North Star]

Dan, we interpreted that section of the CPC as intending to prohibit soft commissions or introducing fees paid to a third party who isnt regulated. It is silent on the main point as in a refund of fees or commissions directly to the client. I do hope our interpretation is correct as we have refunded/rebated commissions directly to the client in some instances. We make a distinction between paying a fee or commission to a third party as opposed to a refund/rebate directly to the client in that the second option has to be considered as client friendly which we all would hope is the main objective of the Code. Have a good weekend all.
Regards Vincent

 

[Steven Barrett]

I do know my old employer has given rebates to clients and on the advice of his compliance officer, put in:

Please note that this payment is gross of any tax liability that you may be liable for. You should seek advice from an accountant on the treatment of this payment.

The compliance officer he uses is top notch.

Dan, maybe your advisor needed the money to buy his kids new shoes

Steven
www.bluewaterfp.ie

 

[Dan Murray]

Dan, we interpreted that section of the CPC as intending to prohibit soft commissions or introducing fees paid to a third party who isnt regulated. It is silent on the main point as in a refund of fees or commissions directly to the client.....

Hi Vincent

I hope you are keeping well. [Good contribution in one of the Sunday papers recently.]

Me, not lawyer, not legal speak understand - so not do have attack on heart please.....

However, I decided to have a gawk at the CPC. Only sensible reference (in this context) that I could find in relation to commission was in Section 3.25

A regulated entity may pay a fee, commission, other reward or remuneration in respect of the provision of regulated activities only to a person that is: [and then goes on to list a pile of categories - all of which relate to non-consumers].

So, this seems consistent with what my adviser told me, as in:
.....Under the Consumer Protection Code, I am prohibited from paying or sharing a fee or commission in respect of regulated financial services to individuals or entities (unless those individuals or entities are also regulated financial services providers themselves).

That said - I can understand the rationale for Vincent's interpretation.

So where to go with all this? Well, for me personally, I am happy that my adviser did not just invent stuff! (....in order to buy his kids new shoes!) However, whilst getting definitive clarification is of interest to me, it would seem to be of critical importance to the practitioners amongst us given our respective callings in life?!

 

[North Star]

Hi Dan,
Following on from this discussion I sent a query to the Central Bank asking for confirmation of our understanding in relation to refunding fee or commission directly to clients. The response included the following;

"The intention of this provision is to prevent the payment of fees etc., to unregulated entities in respect of activities that require regulation. The refund or rebate by a regulated entity to a consumer of commissions paid by a product producer does not fall into this category, as the consumer has not been involved in the provision of regulated activities. Therefore, we do not see any issue with the rebate of such commissions or fees to a consumer, provided it is carried out in the above manner and regulated activities have not been undertaken by this consumer."

We will work on the basis that this is a definitive a clarification.
All the best Vincent

 

[Alan Considine]

Yes I believe all of the kickbacks on volume are gone.. Override is a thing of the past!