MPs call on FSA to regulate advice to public sector bodies
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The FSA should regulate the advice given to public sector bodies about managing cash reserves and investments, according to the communities and local government select committee.
In a report launched today, the committee says the FSA should scrutinise both the services provided and the professional independence of companies that offer local authorities “treasury management” advice.
Committee chair Phyllis Starkey says: “As it stands, the FSA is powerless to intervene in the circumstances that led to a great deal of public cash being put at risk by the collapse of the Icelandic banks. Under current rules cash deposits and professional advice relating to such monies remain an unregulated activity outside the FSA’s remit.”
“We are therefore now calling on the Government to make the simple legislative change necessary to allow the FSA to regulate the provision of such advice. I welcome the FSA’s commitment, if that change is made, to address the concerns which the Committee has raised about the activities of treasury management advisers, including about potential conflicts of interest.”
The committee also draws attention to the fact that treasury management firms seeking clients in the public sector routinely use the phrase “authorised and regulated by the FSA” on their letterheads and promotional literature.
Starkey adds: “As the FSA recognises, the reassurance such statements are designed to offer individuals means some local authority treasury management departments have no idea that the advice or information they seek for the management of their cash reserves is not regulated by the FSA.”
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Readers' comments (7)
Anonymous | 26 Jan 2010 10:08 am
These firms should clearly state which of their activities are not regulated by the FSA. For example if you look on a lot of IFA websites (although not all) it is clearly stated that some tax advice is not regulated. If they promote their service as being regulated, when it isn't, the FSA should look to intervene.
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Evan Owen | 26 Jan 2010 10:13 am
The fact is that most of these public bodies are incapable of being prudent with our money, the answer might be not to give it to them in the first place rather than bolting yet another proverbial door after the herd of horses got out.
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toddy | 26 Jan 2010 10:23 am
Come on. This cannot be right? If this is right, all advice given to local govenment should be regulated by all the regulators in the land. Not just financial advice, as most things the govenment/local govenment decide upon and do have got consequences for the people. The government is elected to take decisions and have the right advisers in place to make law and important decions. They cannot start hiding behind financial advisers.
Why else have they been able to hide behind not disclosing where they get information/advice from (prevention of releasing information requested though Freedom of Information Act). They cannot have it both ways, surely? Or have I is it me who has misunderstood it all??
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LOL | 26 Jan 2010 10:27 am
how will this be funded?
will it be another case of no expense spared piece of regulation carried out by PWC hired by the fsa paid for by the industry?
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Anonymous | 26 Jan 2010 10:42 am
If we are not careful, the FSA will have more power than the Government and as the FSA is not elected, we are moving towards a auhoritarian dictatorship.
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Peter Turner | 26 Jan 2010 11:09 am
So is the FSA going to regulate its own advisers then?
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Glen McKeown | 27 Jan 2010 11:06 pm
There appears to be an implicit assumption that regulation wards off all evils.
After 25 years of regulation we get one of the worst crises in history and the MPs still can't get it through their thick skulls that Regulation is not a panacea, and that the FSA couldn't regulate themselves to the toilet.
Let's go one simile further - the FSA may be little like penicillium - it is treated as though it is the miracle cure for everything, but after a while we find that what survives it is far worse.
Professional advice does not necessarily equate to good advice - fate has a horrible way of turning intelligent thoughts on their head; so putting the FSA in charge of everything could well see the whole financial industry crumble under its dead weight.
Mind you that would cure bad advice - there would be no advice.
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