Concerns are growing that the new regulatory structure could lessen the accountability of the Financial Conduct Authority in important areas.
Advisers, industry groups and MPs have been calling for the Government to increase Parliamentary scrutiny and general accountability of the new regulator.
But Aviva is warning over plans to limit the ability of the Upper Tribunal to overturn decisions taken by the new regulators.
At present, if a firm is un-happy with an FSA decision, it can forfeit a 30 per cent discount on any fines and appeal to the Regulatory Decisions Committee. If it is unhappy with the RDC decision, it can go to the Upper Tribunal which can uphold or overturn the regulator’s decision.
The Government is looking to remove the Upper Tribunal’s ability to overturn decisions made by the FCA or Prudential Regulation Authority relating to regulatory matters, including authorisations and general firm requirements. The tribunal would still be able to overturn supervisory decisions.
An Aviva submission to the Parliamentary committee scrutinising the Financial Services Bill says: “This will weaken the remit of the Upper Tribunal. The proposal should be dropped and the tribunal should continue to be able to issue directions to the regulator. This will help ensure the implications of the regulators’ judgements can be independently reviewed where appropriate.”
Ministry of Justice figures show there were 710 financial cases heard by the Upper Tribunal in 2010/11, with 508 in the first six months of 2011/12.
The figures from the MoJ are not broken down to supervisory and regulatory cases.
The Financial Services Practitioner Panel is warning that the FCA’s accountability to the panel, the consumer panel and the small business practitioner panel will be severely undermined by proposals to remove a requirement for the regulator to explain the rejection of any recommendations made by the panels.
The Treasury select committee published a new report this week calling for it to be given the power to demand retrospective reviews of FCA activities and for the FCA’s board meeting minutes to be published.
It wants benchmarks for cost-benefit analyses to be written into legislation and warns on the FCA’s new powers to publish “early warnings” of investigations.
TSC chairman Andrew Tyrie (pictured) says: “It is not enough, as the Government has proposed, merely to match the weak, pre-existing accountability arrangements of the FSA. They must be substantially strengthened if the FCA is adequately to be accountable to Parliament and, through Parliament, to the public.”
Aifa policy director Chris Hannant says, given the failures of the FSA and the fact the new judgement-based approach to regulation is untested, it is important the new regulators are treated “as if on probation”.
He says: “Real accountability relies on someone having the power to do something. The Upper Tribunal had that and removing this power means an absence of a check and balance over an important part of the regulator’s work.”
Axxis Financial Planning director Owen Wintersgill says: “It sounds like no one can regulate the regulators and they are already too powerful.”