FSA delays cap ad requirements by two years
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The FSA has deferred the introduction of new capital rules for personal investment firms for two years to allow firms more time to prepare.
The rules mean all IFAs will have to hold capital worth at least three months of their annual fixed expenditure, with a minimum of £20,000.
Firms were required to hold a minimum of one month’s fixed expenditure or £15,000 by December 31, 2011, two months worth or £15,000 by December 31, 2012 and three months or £20,000 by the end of 2013.
Firms must now start implementing the new rules on December 31, 2013 with the full requirements in place by the end of 2015.
This is the second time the FSA has delayed the new requirements.
In November 2009, the FSA delayed the final implementation date from December 31, 2012 to the end of 2013.
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Readers' comments (5)
huw | 1 Aug 2011 3:19 pm
I wonder why? Maybe because the state of many firm's finances are deteriorating. Be interesting to know what the real drivers were behind that decision.
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Herbie | 1 Aug 2011 3:19 pm
I phoned the FSA for clarification on the detail of the new rules again last week and frankly they havent got a clue! No one is able to confirm which expenditure items should, or should not, be included and it seems to be down to individual firms to interpret the general guidance as they see fit.
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Karen Grimley | 1 Aug 2011 4:36 pm
Good News!
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Sam Caunt | 2 Aug 2011 8:30 am
I have serious reservations about the proposals in any case – 3 months EBR only ensures that your trade and contractual creditors are paid. Nothing is left to relieve the burden of the financial services industry.
However, the reason for the delay as I see it is to allow firms to adjust their business structure to reduce their 3 months EBR and this is a quite a big job given everything else that is going on in respect of the RDR. I doubt it is because of firm’s financial strength because if they had concerns they would do something sooner rather than later. Re-organisation to meet CA would include moving advisers onto self-employed contracts, moving non regulated business activities into another company etc. That is time consuming, expensive and an unnecessary distraction for firms and their managers.
I am not surprised that the FSA do not understand what CA means in practice. On the one hand they quote accounting standards to explain why you cannot include renewal commission in your capital adequacy calculation yet at the same time spit in the face of those same standards when you try pare off part of your business which perhaps supplies say administrative services (or indeed include good will which is excluded for reasonable reasons but has nothing to do with accounting standards). The FSA have a habit of using standards to support their argument and then replacing those same standards in part to regulate financial services.
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david | 8 Aug 2011 2:07 pm
Yet another well thought out decision that must of got some serious consideration.This is the least of our RDR concerns.
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