HC Deb 07 December 1990 vol 182 cc223-4W
Mr. Riddick

To ask the Secretary of State for Trade and Industry what decision he has reached on the report by the Director General of Fair Trading on the rules made by the Securities and Investments Board concerning disclosure of information relating to the sale of unit trusts and life assurance products.

Mr. Lilley

In April, the Director General of Fair Trading reported to my predecessor on SIB's disclosure rules, introduced during 1989, applying to the sale of unit trusts and life assurance products. The director general concluded that certain of SIB's rules are likely to restrict or distort competition to a significant extent. Under the Financial Services Act, I have to decide whether or not I agree with the director general and, if I do, whether or not the anti-competitive effect is greater than necessary for the protection of investors.

In view of the importance of this issue, my Department invited views from all interested parties to be sent to the Department by the end of September. I have taken account of these views in reaching my decision.

I have concluded that SIB's disclosure rules, as currently drafted, are likely to restrict or distort competition to a significant extent. My main reason is that I consider that the present rules do not automatically provide the investor with the information he needs, and at an early enough stage, to make an informed investment decision. It is especially difficult for an investor to make a comparison between a purchase through an independent financial adviser (IFA) and a purchase through a tied agent.

I have also concluded that the effect on competition is greater than necessary for the protection of investors.

However, I know from the responses received during the consultation period that there are very real concerns about the effects of any new rules that might replace the existing ones. I appreciate these concerns. I also agree with the director general and with SIB in attaching importance to the maintenance of a healthy IFA sector.

I am therefore asking SIB to propose changes to lessen the anti-competitive effect of the present rules but which take into account the desirability of: giving the consumer the comparable and timely information he needs in a form which is readily comprehensible; avoiding imposing unnecessarily burdensome costs on product providers; and ensuring that any changes to the rules on disclosure of commissions do not result in a distortion of competition between IFAs and tied agents.

These are very complex issues which will require further work and consultation. SIB has already indicated considerable identity of view with the director general and has committed itself, with the self-regulating organizations and other regulatory bodies, to an evolutionary approach to disclosure issues. I welcome this and the fact that SIB is already working, through its quality of information working party, to improve the information available, with a view to publishing proposals for comment by the summer of next year. I hope that SIB will pursue this work and introduce new measures within the next 18 months.