The Commission issued Position Paper No. 1 2011 (“Position Paper 1”) as its first step in
relation to its work on the Review of Financial Advice (“RFA”). Position Paper No. 1 2013
(“Position Paper 2”) now sets out (without reasons) the position reached by the Commission as the
result of this process. The reasons for reaching the conclusions reflected here were set out in
its Feedback Paper on Position Paper 1 issued in November 2012 (the “Feedback Paper”).

RFA is the Commission’s response to the Retail Distribution Review (“RDR”), which was initiated
by the UK’s Financial Services Authority (the “FSA”). The RDR is now being progressed by the UK’s
Financial Conduct Authority (the “FCA”), the successor organisation to the FSA.

The RDR is a key part of the FCA’s consumer protection strategy. The aim of the RDR is to improve
clarity for people who are looking to invest, raise the professional standards of advisers, and
reduce the conflicts of interest which are found in commission-based remuneration for adviser
services.

The intention was and remains that the RDR will result in a modernisation of the industry to
address a market that the FSA felt was not working, in that it did not work well for consumers,
advisers or the firms which provide these products and services.

Some of the concerns identified by the FSA also exist in Jersey. The Commission has addressed
these in its RFA.

The Commission’s final position is set out in Section 4 of Position Paper 2.

This is the position which will apply from 1 January 2014 to registered persons carrying on Class
C or D Investment Business in or from within Jersey and it is hoped that it will be of assistance
to registered persons in reviewing their operations and making any changes to ensure that they
will comply with the new requirements from 1 January 2014.

Review of the Reasons for RFA

The two key proposals of the RDR are:

• to increase professional standards of all retail investment advisers; and
• to address the potential for adviser remuneration (initial and trail commissions) to
result in biased advice.

The Commission considers, and the feedback received to Position Paper largely supports the view,

that increasing professional standards together with new adviser charging requirements will

contribute significantly to the reduction of risk to the public of financial loss due to

incompetence, dishonesty or malpractice of persons carrying on the business of financial services

in or from within Jersey. Further, these measures will protect and enhance the reputation of

Jersey in commercial and financial matters. This is in line with the Commission’s guiding

principles described in more detail in section 2.3 below.

Who will be affected?

All persons registered to undertake Class C1 and D2 investment business; and Investment Employees

at those firms, existing clients of such firms and 1.3.2members of the public who seek investment
advice.

Next steps

Position Paper 2 is one of the last steps in the implementation of RFA.

The Commission intends to consult publicly, in due course, on amendments to the Codes of Practice
for Investment Business (the “IB Codes”) to give effect to the policy outlined here. The
Commission also intends to update and re-issue the Guidance Note: “Professional Qualifications:
Investment Business”. It is also possible that the Commission will issue further guidance in
relation to the implementation of the RFA changes.

Timetable

The amendments to the regulatory framework as a result of the RFA will, as consistently stated,
take effect from 1 January 2014.

http://www.jerseyfsc.org/pdf/Position_Paper_No_1_2013_RFA.pdf

http://www.jerseyfsc.org/pdf/Position_Paper_No_1_2013_RFA.pdf