Sifa doubts judicial review of FSCS will be successful
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A former regulator involved in developing the original Financial Services Compensation Scheme arrangements has warned that Regulatory Legal’s judicial review of the FSCS levy is unlikely to succeed, according to Sifa.
The representative body for solicitor IFAs says it consulted the former FSA staff member and his view is that RL would be “most unlikely” to succeed.
Sifa compliance director Ian Cockerill says: “Further, he expressed the view that should they win in the High Court, the FSA could not afford to lose its revenue raising authority and would take them to the ultimate court of appeal, so the risk for RL in having to spend further substantial sums would be high.
“The only aspect that he suggested might have been reasonably challengeable was the timing of the additional levy, as FSCS has, or should have, the ability to borrow to pay claims before it receives the cash to pay them. Otherwise, he considered that ’any contribution to RL would be money down the drain’.”
Cockerill says in Sifa’s view, the people who are best placed to represent IFAs in these situations is the Association of Independent Financial Advisers.
He added: “Moral indignation is not a sound basis for legal action and the law is not to be confused with justice. The main beneficiaries of legal action are usually the lawyers.”
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Readers' comments (9)
Evan Owen | 14 Jul 2010 10:21 am
Some might say "he would say that wouldn't he", the former regulator chappie. I would like to talk to him.
I find it very interesting that Ian Cockerill has come out with this statement now, this week.
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Adam Smith | 14 Jul 2010 11:08 am
“Moral indignation is not a sound basis for legal action and the law is not to be confused with justice. The main beneficiaries of legal action are usually the lawyers.”
That's the most sensible thing I've read on this whole subject!
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Julian Stevens | 14 Jul 2010 11:49 am
For "revenue raising authority" read open mandate to milk the industry for however much it wants, with no hand of restraint and no body in place to say "Now just hold on a minute". This is why the issue of the Statutory Code of Practice (namely the fact that the FSA brazenly ignores it) is of such fundamental importance.
I wonder why Gareth Fatchett seems quite uninterested in initiating any sort of action based on that?
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Mike Fenwick | 14 Jul 2010 2:13 pm
This is an extract from my post on Nic Cicuttis' article " In more recent e-mails shared with Evan Owen, Chris Cummings, Alan Lakey, and Paul McMillan, Gareth Fatchett has been made aware that my involvement may assist in the JR, and may address aspects not yet raised by him. Clearly, whether that is to be the case depends on whether sufficient funds are raised to allow the JR to proceed, but I am happy to place on record that I will assist, if the JR proceeds, and if Gareth eventually deems any contribution from me worthy of inclusion."
Post and full article here:
http://www.moneymarketing.co.uk/regulation/should-you-support-fight-against-fscs?/1014790.article
However, despits my "ifs" let me in this post raise an issue I have not seen raised by anyone else, and is one of those I cannot see raised by Gareth Fatchett in his papers to date.
Before reading the comments below, try searching the MM site using just two words "client money".
You will get quite a number of hits, J P Morgan, Close Brothers etc etc - all referring to how the FSA view the need for authorised firms to handle the monies entrusted to them in a manner which is beyond reproach.
If you haven't bothered to do that search, let me offer you an extract from one of the articles:
"FSA director of enforcement and financial crime Margaret Cole says: “The FSA has repeatedly emphasised the importance of ensuring client money is adequately protected.
“Despite being one of the largest holders of client money in the UK, JPMSL failed to do so.
“This penalty sends out a strong message to firms of all sizes that they must ensure client money is segregated in accordance with FSA rules. We have several more cases in the pipeline.”
Stick with me, just a while longer and I will explain where I am heading, but we need an extract from the FSA fees rules - these will suffice:
"industry block - (in DISPFEES) a grouping of firms by common business activity for the purposes of calculating the general levy.
2.1.8 G The amount payable by each fee payer will depend upon the category (or categories) of regulated activity or exemption, or other relevant activity applicable to that person (fee-blocks). It will, in most cases, also depend on the amount of the business that person conducts in each category (fee tariffs).
2.1.9 G By basing fee-blocks on categories of business, the FSA aims to minimise cross-sector subsidies. The membership of the fee-blocks is identified in the FEES provisions relating to the type of fees concerned."
Now, I like many others have questioned why if Keydata were authorised as one thing, it was the decision of the FSCS that it was another thing altogether. Yes, indeed, that is one important part of what Gareth Fatchett is addressing.
But let me address that issue in a different way, one that I have not seen raised.
Keydata paid fees to the FSA - now the obvious question is under what category were those fees requested by the FSA and paid by Keydata.
The less obvious but perhaps more important question is "Where has that money gone - particularly given the FSCS decision"?
Re-read what the FSA set out as their rules on fees, perhaps concentrate on the intent to avoid cross-subsidy.
Now my question
- have the FSA taken into account the FSCS decision, and immediately upon knowing that decision, re-allocated any fees paid by Keydata to the Intermediary class
- if not, then either they do not agree with the FSCS decision, namely Keydata was NOT an Intermediary
- or they have not post the FSCS decision allocated the monies in their care appropriately and imho their pronouncements on the ability of others to properly segregate monies ... well, need I say more?
As Deep Throat once wisely advised "Follow the Money". Doing so can uncover more than perhaps you may initially realise.
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Simon Kershaw | 14 Jul 2010 2:38 pm
Does Mr Cockerill not realise that IFAs know all this? I did send money to Gareth Fatchett in the sure and certain knowledge that I might as well have burnt it.
At least I have the satisfaction of knowing that our bloated regulator will have to
defend its ineptitude in forum.
£200 is peanuts compared to the next FSCS "special" levy.
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Gareth Fatchett | 14 Jul 2010 10:29 pm
Julian,
Have you seen the grounds ? They were drafted tightly to ensure we put forward our best case. It is worth people reviewing them.
Gareth
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Gareth Fatchett | 14 Jul 2010 10:37 pm
SIFA's Position
What has working for the regulator prior to the FSA got to do with this judicial review case.
Is it that AIFA and SIFA want us to fail so they can say "told you so" ?
Seems to me that they are putting their personal interest in front of that of the people they are supposed to represent.
We plough on and are pleased with the positive response from IFA firms who understand this is more about winning and losing.
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Evan Owen | 15 Jul 2010 10:17 am
Hi Gareth
Glad to see that you can find the time to submit a comment while you are on your hols, it shows commitment.
Did you read all the previous comments?
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Simon Kershaw | 15 Jul 2010 1:27 pm
Gareth
Take a long look at Mike Fenwicks post.
He may just be on to something.
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