The regulator has issued a feedback statement (7-page / 1MB PDF) to a consultation it ran on the issue earlier this year. It ran a consultation to "ensure there were no unintended consequences" after admitting that a "typographical error" had been included within a previous definition of the term that it had drafted.
According to the finalised definition, a 'platform service' is a service which "involves arranging and safeguarding and administering investments; and distributes retail investment products which are offered to retail clients by more than one product provider; but is neither: solely paid for by adviser charges; nor ancillary to the activity of managing investments for the retail client".
Under the terms of the Retail Distribution Review (RDR), platforms that offer clients retail investment advice are to be barred from receiving payments, such as commission, from product providers when recommending that their clients invest in those providers' products. Instead, financial advisers must ensure that the only payment they get for such advice is received from their clients.
Some platforms allow consumers to make investment decisions without the aid of advice. These 'execution-only' platforms will be allowed to receive payments from product providers under certain conditions.
The rules are due to take effect from 6 April next year, but a two-year hiatus will apply to account for so-called 'legacy' assets that were bought on the platforms prior to that date. By 6 April 2016 platforms will be required to ensure that they adhere to the new regime for all of the assets purchased via their service, whether legacy or not.
In its statement the FCA rejected claims that the change it had made to the definition of a platform service was "last minute" and that therefore it "would pose serious challenges for firms".
In addition, it also said that it would leave it up to execution-only platforms to decide how they display to customers the platform charges that they impose in cases where those platforms use "true platforms ... for custody of its clients’ assets". They can decide whether to display a single charge or a breakdown of how that total charge is made up, it said.
The FCA also said that the new definition would apply to all offline, as well as online, platform services that fall within the scope of the definition.
It also said that execution-only platforms will be able to use a system of rebating to get around cases where they hold "international assets where there is no clean share class". Assets with clean share classes are commission-free, and industry efforts are being made to move customers' existing asset portfolio to clean share classes in order to avoid the breaching of the rules on commission payments by third parties.