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FSA clarifies rules on trail commission

Gavel lawbooksThe Financial Services Authority (FSA) has clarified rules about when trail commission, which advisers receive for recommending products, can be transferred between advisers after the retail distribution review (RDR) comes into force at the end of 2012.

Trail commission is paid by an asset management firm to an adviser who has recommended that his or her client invests in the firm's fund. When the RDR comes into force, advisers will not be allowed to receive trail commission any more. But trail commission can continue to be paid on pre-RDR advice.

The FSA said that, if a client moves to a different adviser, the trail commission can be re-registered to the new adviser. But the new adviser must provide an “ongoing service”.

Trail commission on pre-RDR advice can also be transferred between advisers as part of a bulk transfer, for instance when an adviser sells his or her entire client bank to another adviser. But in this case there is no requirement to provide an ongoing service to individual clients.

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