FSA confident of legal position on QCF level 4
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The FSA says it has clear legal advice confirming it is able to enforce higher minimum qualifications for advisers.
Speaking at the Tax Incentivised Savings Association conference in London today, FSA director of conduct policy Sheila Nicoll warned advisers not to try to flout its retail distribution review reforms. She said it was disappointing that there are “still signs of denial or misplaced wishful thinking” that the proposals will go away.
She cautioned advisers that the FSA has clear advice that it can legally enforce a higher minimum standard of qualification.
She said the regulator can remove an adviser’s right to trade if they do not comply.
Nicoll said: “A word of caution for those who might think that they may successfully challenge our ability to raise qualification levels.
“I want to reiterate that our proposals are legal.
“We have the power to change our requirements if it is in the interests of protecting consumers, and we are entitled to remove an individual’s licence to trade if we deem them not to be competent.”
Nicoll also warned firms not to try and cash in via a closing-down sale on commissions.
She said the regulator has heard of firms trying to build up trail commission or take high up-front commissions before the new rules on adviser charging are enforced, but she said this kind of behaviour would be frowned upon, and the FSA would do thematic work in the run-up to 2012 to ensure that there was no consumer detriment resulting from it.
Nicoll said: “I want to pause to give a very clear warning to advisers who may be looking to flout our reforms or who may seek to maximise their own profit and rewards before our rule changes take effect, while not paying appropriate regard to the interests of their customers.
“We have heard that some firms, both providers and advisers, may see the period between now and implementation as an opportunity to build up business with trail commission to get round our proposals, or to suggest products in which they receive very high remuneration but which may not be the most appropriate for the consumer.
“We will take a very dim view of such detrimental behaviours and it is our intention to do some thematic work in the lead-up to the end of 2012 to make sure that consumers aren’t losing out.”
On alternative assessments, Nicoll said the regulator would continue to listen to proposals, but that alternatives must stand up to scrutiny.
She insisted that the RDR timescales are realistic. She said she was “concerned” about suggestions that the FSA might not have considered its EU obligations when putting together its RDR proposals, asserting that the regulator has been sure to keep Brussels informed and updated at every stage in the process.
Responding to concerns that reforms to adviser remuneration will exclude customers who cannot or will not pay a fee for advice, Nicoll said: “That is not our intention and we have said explicitly that charges can come out of the product.”
Nicoll also revealed that the FSA will be publishing another RDR paper next month, which will include a look at potential read-across of the proposals to pure protection and group personal pensions.
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Readers' comments (21)
believeitwheniseeit | 18 Nov 2009 3:56 pm
If this is indeed the case the"open and transparent regulator" should make the "clear legal advice public".
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Anonymous | 18 Nov 2009 4:42 pm
Under RDR we have to get be paid by client agreement perhaps all ifa's should stand together and demand that our regulatory fees should also be agreed rather than being imposed.
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Anonymous | 18 Nov 2009 4:48 pm
The FSA- 'open and transparent regulator' ?? Are you having a laugh? WIthout question an absolute joke of a regulatory body.
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John Ellis | 18 Nov 2009 4:51 pm
The big question over compulsory qualifications has for some years been MiFID. The FSA a few years ago told LIA and CII that it was questionable whether, under MiFID, even the FPC could be retained as a compulsory regulatory requirement for IFAs, unless the other European Member States also adopted it. That was one reason why the initial approach to RDR stressed the industry raising its own standards through a single professional body, with the FSA incentivising membership of and conformity to the requirements of such a body. Clearly the interpretation has changed and it would be interesting to see the legal justification for this.
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Mr Anon IFA | 18 Nov 2009 4:53 pm
As Micheal Caine said in the film 'The Eagle Has Landed' I can always tell a thorough going ****** when I hear one. Don't worry Nicoll, despite what you say, we do actually live in a democracy. We are not in denial, we just dont have the luxury of an index linked pension and a nice fat pay packet to fall back on like some people. These changes are not all bad, it is just the way they are being driven though at speed without regard to the effect it is going to have on established business models. Your threats are unecessary and smack of a regulator that is too powerful and lacks a real understanding of the real issues here. I would like to see some flexibility and understanding for those advisers that have tried their best and are nearly there but through no fault of their own are finding the timetable very demanding.
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anon | 18 Nov 2009 4:54 pm
Please TCF FSA can we see the advice or is it on a par with Gordon Browns legal advice that the FSMA 2000 was compatible with the Human Rights? So solid was that advice that he ran scared when asked to disclose it!!!
What is it with these bullies? This is a totally unnecessary and vindictive fight! Within six years plus most of their targeted IFAs will be out of this hellhole in any case and the FSA will be left wondering who will pay their fat cat wages!
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Roger Lane | 18 Nov 2009 5:06 pm
Rather frightening lady, I wonder why she and the FSA feel the need to be so aggressive. Just because you can do something, doesn't make it right. Equally I think legal argument has often been proven to be open to interpretation and all too frequently those with an axe to grind only hear what they want to hear. I still don't see why competent advisers with a good track record should be treated this way but it looks like we will be. I am not against better qualified advisers but there has been a lot of comment today along the lines of get real, FPC's were simple, any fool could pass them. A bit simplistic but possibly true but takes no account that most of us have attended loads and loads of specialised courses every year since then, not to mention annual re-licensing and regular product upgrade examinations so to try and pretend, as many do, that we have done no studying since taking FPC's to stay current is ludicrous. The FSA’s stance is little short of tyrannical and is not justified by the evidence.
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believeitwheniseeit | 18 Nov 2009 5:08 pm
FAO Anonymous 4.42
Open & Transparent is how the FSA describe themselves.If you do not believe me take a look at the FSA website.
I have to agree-it is laughable,or at least it would be if it did not affect us all so seriously.
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Rod Collins | 18 Nov 2009 5:13 pm
I look forward to the FSA making the clear legal advice available to us all!
Why do the FSA have to keep on threatening IFA's all the time?
There are some very knowledgable IFA's in their 50's and 60's who are going to be lost to the profession (this is always bad in anyone's world)!
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SIMON MANSELL | 18 Nov 2009 6:50 pm
Such a view from the FSA is no surprise. The FSA takes it s authority from the doctrine of Parliamentary Sovereignty, but that does not make its actions right. It did not make the actions right for those that claimed the same defence at the Nuremberg trials!
However, The Human Rights Act gave the courts the power to declare that an Act unjustifiably infringed human rights even if it is covered by Parliamentary Sovereignty.
At the time Lord Lester of Herne Hill QC and Monica Carss-Frisk were of the opinion that the FSMA 2000 was bad law and in breach of the Human Rights Act. Anthony Speaight QC took this view also and Peter Hamilton from the same chambers takes the view that the FSA is acting beyond its powers.
Remember that Gordon Brown claimed that he had legal opinion to say the FSMA 2000 was compatible. Well when challenged he refused to release this! Now in the interests of clarity it would be nice to see the FSA's legal opinion so that this issue can be put to bed one way or another. Thus I join the calls for the FSA to show it legal opinion!
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