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Sourcebooks / Advice boundary

Advice boundary

United Kingdom

UK — Advice boundary

Source: FCA Handbook, PERG (Perimeter Guidance) chapter 8. Deliberately different clauses from PERG 8.28 / PERG 8.4.4 / RAO art. 53, which are already in rules/grading/product_recommendation.md.

PERG 8.30B.2G

Verbatim clause withheld — the publishing authority's reuse terms do not confirm a right to redistribute the exact text (see sourcebooks/NOTICE-SOURCEBOOKS.md). See the URL above for the original, and "What this means" below for Doshi's own paraphrase.

What this means. The FCA sets a 4-part test for a "personal recommendation" — the type of advice that triggers full regulation. The recommendation must go to one investor (or their agent), be about a specific investment, and be presented as fitting that person, or based on their circumstances. A recommendation sent to the public only, with no personal fit, is not a personal recommendation. This is a lower bar than it looks: condition 3 is met by either presenting the advice as suitable OR by basing it on the person's circumstances — a firm cannot avoid the test just by not using the word "suitable" if it plainly used the person's own details to shape the recommendation.

PERG 8.24.2G

Verbatim clause withheld — the publishing authority's reuse terms do not confirm a right to redistribute the exact text (see sourcebooks/NOTICE-SOURCEBOOKS.md). See the URL above for the original, and "What this means" below for Doshi's own paraphrase.

What this means. The FCA gives a 5-part checklist for whether a statement is "advice on investments" at all. All 5 conditions must be true: it must be about a specific security-type investment, aimed at an investor, be advice (not just information), and be about buying, selling, or holding that investment. Miss one condition, and it is not regulated advice. This checklist runs before the personal-recommendation test in PERG 8.30B.2G above: a communication has to clear this 5-part hurdle first, then clear the personal-fit hurdle, before it counts as regulated personal advice.

European Union

EU — Advice boundary

Source: Insurance Distribution Directive (EU) 2016/97, art. 20(1). Different clause from IDD art. 2(1)(1), already in rules/grading/product_recommendation.md.

Note: fetched via legislation.gov.uk's EU-retained-law mirror, not eur-lex.europa.eu directly (eur-lex returned empty content on every attempt). See sourcebooks/suitability/eu.md for the full caveat.

IDD art. 20(1)

Prior to the conclusion of an insurance contract, the insurance distributor shall specify, on the basis of information obtained from the customer, the demands and the needs of that customer and shall provide the customer with objective information about the insurance product in a comprehensible form to allow that customer to make an informed decision. Any contract proposed shall be consistent with the customer's insurance demands and needs. Where advice is provided prior to the conclusion of any specific contract, the insurance distributor shall provide the customer with a personalised recommendation explaining why a particular product would best meet the customer's demands and needs.

What this means. An insurance seller can give a customer objective product information tied to their stated demands and needs. That, on its own, is not advice. Advice starts only when the seller adds a personal recommendation that explains why one specific product is the best fit. Even the information-only stage carries a duty: any contract the seller proposes must still be consistent with the customer's stated demands and needs, whether or not the seller ever gives a personal recommendation.

United States

US — Advice boundary

Source: FINRA Rule 2111, Supplementary Material .03. Adds to, and does not repeat, the Investment Advisers Act and Reg BI clauses already in rules/grading/product_recommendation.md.

FINRA Rule 2111, Supp. Material .03

Verbatim clause withheld — the publishing authority's reuse terms do not confirm a right to redistribute the exact text (see sourcebooks/NOTICE-SOURCEBOOKS.md). See the URL above for the original, and "What this means" below for Doshi's own paraphrase.

What this means. FINRA draws a line between general information and a recommendation. Basic investment concepts, index history, inflation effects, and retirement income estimates are general information. This information stays outside the suitability rule as long as it does not name a particular security. The line moves only when a specific product enters the reply. The safe list also covers employer-plan mechanics — explaining what a 401(k) is and how it works stays general information, even without naming a fund, because the rule carves out plan-descriptive content by name.

Australia

Australia — Advice boundary

Source: ASIC RG 244 (giving information, general advice, and scaled advice). Sits apart from the Corporations Act 2001 advice definitions (s. 766A, s. 766B) already in rules/grading/product_recommendation.md.

RG 244.30

We will not treat factual information given by you as general or personal advice if: (a) you clarify at the outset that you are giving the client factual information where there is a reasonable likelihood of doubt; and (b) the information is not intended to imply any recommendation or opinion about a financial product.

What this means. A firm can give a client plain facts about a product. This is not advice, as long as the firm makes clear at the start that it is giving facts, not a recommendation. A vague or unclear disclaimer does not meet this test. ASIC's own wording ties the disclaimer duty to doubt: it only requires the upfront clarification "where there is a reasonable likelihood of doubt" — a context where no reasonable person could mistake the message for advice may not need the disclaimer at all, though adding it is the safer default.

RG 244.43

Advice may be regarded as personal advice if it is presented in a way that means a reasonable person might expect you to have considered one or more of the client's objectives, financial situation or needs... General advice about a financial product will not be personal advice if you clarify with the client at the outset that you are giving general advice, and you do not, in fact, take into account the client's objectives, financial situation or needs.

What this means. General advice stays general only if the firm does not, in fact, use the client's own circumstances to shape it, and says so upfront. A general advice warning does not fix advice that did use the client's own circumstances. The test is about what the firm actually did, not what it labelled the advice. A firm that adds a "general advice" warning to a recommendation it privately tailored to one client's super balance and goals has still given personal advice.