Stretched FSA to cut focus on small firms

16 December 2010 | By Natalie Holt

The FSA says it will spend less time on routine supervision of smaller firms to allow it to concentrate on the transition to the new regulatory structure.

Speaking at the Thomson Reuters offices in Canary Wharf on Monday, chief executive Hector Sants said the regulator’s management resources are “undoubtedly stretched” as it has to design the new regulatory approach and manage the transition.

Sants said the majority of FSA staff’s time is spent on frontline supervision but the regulator needs to reprioritise its efforts to oversee the complex trans-ition process. He said: “We will inevitably be decreasing the amount of time spent on pre-emptive, routine supervision of lower-impact firms.”

Sants said the FSA is trying to regulate in a proportionate way while it works to set up the Prudential Regulation Authority and the Consumer Protection and Markets Authority.

He said: “We have a high number of staff and the reorganisation is a major challenge which clearly needs to be delivered on time in as cost-effective a way as possible. Some modest alteration of our risk profile is an inevitable consequence of that programme.”

But Sants added that alth-ough the FSA’s approach is bec-oming thematic and less firm-specific, the regulator’s core inspection programme will continue.

The FSA currently visits all firms on a four-year cycle, with firms that get full Arrow assessments visited every two years. Sant said this cycle of supervisory visits will be maintained.

Yellowtail Financial Planning managing director Dennis Hall says supervision of small firms has not been proportionate to the risk they pose.

He says: “Firms with three advisers or less have to spend a disproportionate amount of time getting information that we wonder what the regulator does with.”

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