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Referrals and Leads Generation

Clarity on the regulation of this important aspect of the financial services industry is provided in proposals in the Retail Distribution Review (RDR).

Where a referral involves the mere passing on of contact details of a prospective customer to an intermediary or product supplier by another person (who is not a regulated financial institution or intermediary) then this may not be treated as an intermediary service, except in those cases where the referral involves an interface/dialogue between the prospective customer and the lead provider. In these cases, the line between referrals and non-advice sales execution can become blurred, and to avoid regulatory arbitrage such a process should be regarded as a form of financial intermediation subject to appropriate conduct standards.

Where the lead provider performs the service of providing a potential customer with the name and/or contact details of an intermediary or product supplier, whom the customer may then approach to obtain advice or other services, this may also be regarded as a form of financial intermediation, subject to appropriate standards.

The relevant RDR proposal on this reads:

Proposal I: Standards for referrals and lead generation

Certain specifically identified forms of referrals and leads will be included in the regulatory framework as a form of financial intermediation, and will be subject to specific conduct standards. Conduct standards in this regard may relate to:

  • Disclosure of and limitations on the nature and source of remuneration or other financial interest derived by referral or lead provider.
  • Management and disclosure of any potential conflict of interest between the provider of the referral and the customers or other parties concerned.
  • Measures to ensure customer consent and protection of customer information in appropriate circumstances.
  • The responsibility of product suppliers or intermediaries in relation to their use of referral or lead generation services.

In cases where the referral or lead provision does not meet the relevant criteria to be regarded as financial intermediation, depending on the structure of the arrangement, it may nevertheless be subject to relevant standards for marketing and advertising activities, or for the outsourcing of activities by a product supplier or intermediary as the case may be.

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