Big rise in FSA ordering costly compliance checks
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Advisers face costs of meeting compliance notices
Aifa has sounded the alarm over a big increase in costly compliance checks the FSA is demanding of adviser firms.
Director general Chris Cummings (pictured) says he is seeing a marked increase in the number of section 166 skilled person’s reports that FSA supervisors are ordering advisers to carry out. He believes the rise is part of the FSA’s more intrusive supervisory approach led by Hector Sants but is out of proportion compared with the risks in the sector.
If firms are hit with a section 166 notice, they must hire an external FSA-approved firm to carry out a thorough check of their work, which could cost thousands of pounds.
In 2008/09, the FSA issued 56 demands for a section 166 notice compared with 29 in 2007/08. The regulator has not released figures for this year.
Cummings says: “We are seeing a huge increase. Skilled person’s reports are very expensive and disruptive and the firm has to pay for them.
he costs of these services are going up because the people who do them understand that firms do not have an option and they are being used more often. There is a cohort of firms trusted by the FSA to carry them out and, of course, they are not the firm’s best friend, they are not there for the firm’s benefit and the whole encounter is very bruising and should be used with caution and only as necessary.”
Cummings says supervisors are now instructed, under the FSA’s more intrusive supervision regime, that they must be “interrogating firms”.
He says: “What I sense is that the FSA is wanting to turn the heat up in the kitchen and things that they would have previously just had a discussion about, now automatically lead to a section 166 being instructed.”
The FSA confirmed the number of s166 notices it has issued but would not comment further.
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Readers' comments (15)
Anonymous | 1 Apr 2010 9:52 am
How about some honesty from the FSA, they obviously just want rid of IFAs so that their friends in the Banks can prosper. Instead of kicking us about until they lose us, please come clean and say so.
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Frank Iredale | 1 Apr 2010 9:57 am
The FSA have now become bullies. This should not be the behaviour of a regulator.
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Bernard Croft | 1 Apr 2010 9:58 am
Whatever happened to "lighter touch" regulation?
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harry c | 1 Apr 2010 10:03 am
having spent the best part of 20k on one of these "interogating firms" ending up with no real issues I have just had enough of this perverse and corrupt industry.....no not advisers!.....and am getting out after 30 years
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Anonymous | 1 Apr 2010 10:59 am
Is there a Parliamentary Ombudsman issue here if powers really are being used disproportionately? Even HMRC bear the cost of formal investigations. The FSA is out of line with public policy. I know MP's are not the flavour of the month, but this really is a matter for them.
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Incompetent Regulators Awards Team | 1 Apr 2010 11:00 am
FSA will be defunct after elections and Banks will be regulated by BOE so hopefully no RDR. All IFA firms should refuse to pay anymore F-Pack fees, that'll sort the problems!
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Anonymous | 1 Apr 2010 11:04 am
I don't blame you harry c. I have been in the business for 29 years and I never thought it would degrade to this level. We are not trusted anymore and it is time to go. The problem for me is, the real crooks are the banks and the FSA, but they are big enough to get away with it.
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Anonymous | 1 Apr 2010 11:04 am
I don't blame you harry c. I have been in the business for 29 years and I never thought it would degrade to this level. We are not trusted anymore and it is time to go. The problem for me is, the real crooks are the banks and the FSA, but they are big enough to get away with it.
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Anonymous | 1 Apr 2010 11:51 am
Trying to keep the business afloat during a recession and having to deal with TENS of thousands of pounds of compliance costs, just to be told advice given was suitable has all but killed my business. There must be an inquiry into the way the FSA is allowed to behave towards IFAs who have no control regarding the way we are treated. This situation an national disgrace - the majority of IFA's just want to earn a living providing the public with sound financial advice. Yes we charge for it but that is no crime considering our qualifications, the work and risk involved providing advice, particularly when you have a Government in power that allows situations like Kaupthing to just happen and then take no responsibility at all. Yet again the IFAs will take the brunt of the blame and cost. Who in their right mind would stay in this industry?
The Government should cop on. The situation in the UK regarding people who have no clue about matters relating to finance is terrible. IFA's are needed and should be respected, not hounded out of business by the regulator.
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Anonymous | 1 Apr 2010 1:23 pm
I haver just emailed my MP. Maybe if we all do the same it might help?!
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