LONDON, Oct 1 (Reuters) - Britain's financial watchdog has contacted 24 investment firms warning them not to try to dodge reforms aimed at stopping life insurers and fund management companies offering sweeteners to advisers selling their products.
The Financial Services Authority (FSA) said on Monday it was aware of "moves in the market" that could undermine the effectiveness of its Retail Distribution Review - a package of reforms to do away with commission-based selling to consumers.
Under the new system, people seeking financial advice will pay a fee for the service, as opposed to a commission if they buy an investment product. Regulators argue the new system will ensure independent advice.
The existing system is not conducive to unbiased advice in the best interest of the client because advisers often push consumers towards the products of firms offering the most generous commissions, regulators argue.
The FSA said it was concerned some firms were seeking to evade the new regime by "soliciting or providing payments (or) benefits".
"This might mean that advisers continue to provide biased advice to consumers when recommending a product provider and also make some firms' adviser charges look lower than others simply because of the deals and arrangements they have in place with providers," the FSA said in a statement.
A spokeswoman from the FSA declined to identify which firms were contacted but the regulator stated in its letter the sample "comprises the largest providers of retail investment products and the largest distributors".
The regulator highlighted examples causing it concern such as providers contributing to adviser training costs, including entertainment and social events, payments to distributors for promoting products and covering some IT expenses.
In the letter the FSA asked recipients to confirm by October 15 that the agreements it has with providers will comply with the new rules introduced at the start of 2013.
"We will be challenging firms who are pursuing these deals and arrangements and we will take robust action where we see evidence that they are circumventing the rules," the FSA said in its statement.
(Reporting by Chris Vellacott; Editing by Laurence Fletcher and Helen Massy-Beresford)
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