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- Freedom of services allows firms to provide financial services in the UK
- No UK recourse for consumers which use these firms


More needs to be done to protect UK citizens from crooked financial advisory firms which use freedom of services laws within the EU to dodge UK consumer protection rules and dupe consumers into believing they are dealing with FCA regulated firms, according to AES International.

In the UK there are currently scores of companies which claim to be regulated by the FCA, but which, upon closer inspection, are actually regulated in less tightly controlled parts of the EU.

Under “passporting” rules, these companies are free to travel into the UK and sell products to unwitting consumers who believe they are dealing with UK authorised firms and individuals because the FCA issue the firms with a number. They are different from EU firms which have an ‘establishment’ in the UK, as these are regulated by the FCA and clients can complain to the Financial Ombudsman Service as a means of recourse.

So, and importantly, if a consumer does use a firm which is not regulated by the FCA despite appearances, they will have no recourse to the Ombudsman and so could be left out of pocket if something were to go wrong.

Sam Instone, chief executive of AES International, a UK regulated firm which specialises in advising British expatriate clients, said: “I have seen innumerable examples of EEA firms passporting into the UK with large numbers of trading styles or appointed representatives who can easily bypass all the regulatory controls for consumer protection.

“While the FCA do have a disclaimer on their register stating these firms may only be subject to limited regulation and that clients should ask the firm about its complaints and compensation procedures; it would be almost impossible to find or decipher by the normal retail client.

“The terminology and procedures in European passporting aren’t easy for a client to understand and these EEA companies operating through a dubious mist of complexity are a time bomb waiting to go off.

“One of the most frustrating aspects of this is that, if a consumer were to check the FCA register, the freedom-of-services firm would be present, giving that consumer unfounded confidence in the company; it is most unlikely the client would click through to find the disclaimers and that their interests are bound to suffer as a result.”

Instone added that the conduct of business standards are so different in other EEA states, particularly in relation to transparency and charging, that most firms of this type simply bypass it. 

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