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Accountability fears grow on FCA set-up


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.”


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 1st March 2012 at 9:16 am

    Given that Adair Turner has claimed to support the idea that the FCA should be more accountable than the FSA, one might reasonably expect him to speak out against any proposals that could weaken or remove the ability of the Upper Tribunal to overturn decisions made by the FCA or Prudential Regulation Authority relating to regulatory matters. (But no judgements by hindsight please ~ that’s a privilege we want to retain exclusively for ourselves to use against others).

    One is tempted to surmise that there may well be a few significant differences between what he says in public and the strings he’s trying to pull behind the scenes. Just like politicians ~ tell people what you think they want to hear whilst, in reality, pursuing a very different agenda. Hardly surprising, I suppose, given that the FSA is a part of the government and so will the FCA be.

  2. So we elect MPs to act on our behalf and in our best interests and then governments abdicate that responsibility by ceding powers to unelected bodies such as Quangos and the European Commission – and this is in addition to the powers ceded to the European parliament. No wonder so many things go wrong – nobody seems to have overall control – even down to David Cameron claiming he couldn’t overrule Vince Incapable in the appointment of the ‘universities tsar’. Find it difficult to believe that nobody mentioned to him that he could easily overrule Incapable by sacking him – or have Government Ministers also become unaccountable?
    Wish I could follow the lead of our august parliamentarians – get a job, take the full pay (and top up with ‘expenses’) and then abdicate all of the tasks and responsibilities to someone else. End up being paid solely for the work put into claiming the expenses – and then a gold-plated pension at the end!

  3. Derek Bradley ceo 1st March 2012 at 10:01 am

    You only get one chance to get the remit and responsibilities right. Failure is not an option it is a disaster for all.

    Regulation without responsibility is just plain wrong. Canary Wharf cannot be allowed to create a real life equivalent of the “Death Star” destroying all in it’s path for its own often whim based agendas.

  4. I thought it already had!!!

  5. No point in voting Kevin!
    That is exactly what our politicians do. They canvas for our vote then turn around and tell us that, in spite of the fact that they have been elected by way of a democratic decision, they are powerless in the face of unelected unaccountable undemocratic money guzzling quango’s.
    No wonder politicians are held in such low esteem. They want the top jobs with the proviso that when the proverbial hits the fan, they can then pin the blame on another body which has no accountability.
    The end result being no one is to blame no one takes any responsibility.
    We had public proof that this is how the system works when Nicoll & Sants were called before the TSC. From now on I will no longer cast my vote. To do so would be a futile exercise

  6. This has to be an opportunity to write to Andrew Tyrie and your own MP.

    The idea that a Quango regulatory body can make decisions that affect thousands of individual investors and advisers, without any potential liability accruing to it if the decisions it makes create the potential of losses to individuals and advisers is absurd.

    It drives a coach and horses through any reasonable application of common sense, duty of care, responsibility for any consequential loss arising and accoutnability.

    It simply cannot be right.

    I will be conveying this to Andrew Tyrie today and I urge everyone else to do the same.

    Ian Coley
    Medical Investment Services

  7. Fewer people with more power and less accountability – it’s hardly the “big society” that Cameron desires. The scale of the banking crisis demonstrated a lack of regulatory judgement – that in itself surely warrants more accountability, not less. Any organisation that genuinely wants to improve itself would surely welcome input from an independent body. If they don’t that speaks volumes. And I still find it astonishing in this day and age that a parliamentary comittee can’t (and possibly won’t) have access to the FSA/FCAs board meeting minutes. Let’s hope the Government listens and more accountability is written into the new legislation.

  8. Wasting your time Ian.
    The TSC has already admitted it is powerless against the FSA. Hence the smirking from Ms Nicoll.

  9. The FSA’s current power to offer a 30% discount for early settlement is extremely unhealthy. What such a system constitutes is a direct and blatant disincentive for anyone to refer any decisions against them by the FSA for review by a supposedly impartial body. How can that be right? It’s the same thing as threatening any consumer who dares to refer a complaint to the FOS with having to bear all the costs of the party against whom they’ve complained if the FOS doesn’t uphold their complaint.

    On the one hand, the FSA has declared itself to be fundamentally opposed to any measures that may discourage consumers from using the FOS (such as requiring payment of a modest case fee). So still we see far too many frivolous and vexation complaints, for the simple reason that they cost consumers nothing, whichever way they go.

    Yet, on the other hand, the FSA has granted itself ~ without consultation and without approval from any outside agency ~ the right to pursue a system that actively discourages regulated entities from having their case reviewed by a third party. So whilst consumers are actively encouraged to refer complaints to an independet adjudicator, regulated entities are actively DIScouraged from so doing. Why should regulated entities have less rights than consumers?

    What the FSA’s early settlement discount system REALLY means is that if the party against which the fine has been decreed dares to exercise what should be a constitutional right of appeal and the Tribunal upholds the FSA’s decision, the FSA will increase the fine by a 43%. Dare to challenge us and fail and we’ll hammer you for such impudence.

    Now the government appears to be proposing to weaken still further the already battered rights of regulated entities, thereby strengthening the FSA’s dictatorial powers. This is plain wrong and, in a supposedly democaratic society, an offensive travesty.

  10. It is even a travesty of justice that one has to forfeit the 30% discount in order to appeal an FSA decision.

    At present the regulator consistently misses mis-selling scandals until it’s too late, fails to act in a timely manner, if at all, on institutions (e.g. Equitable, Independent, N Rock, Bradford & Bingley, RBS and HBOS) and then wants to hide behind non-accountability.

    And the only person in Parliament who has the guts to take them on is Andrew Tyrie!

    Now we have the NAPF saying openly what IFAs have been saying for a while about people with small pots losing independent advice.

    Come on Mr Cameron et al, extract your digits and either delay the experiment of RDR until it is better thought out, or scrap it. Make the FSA fully accountable to Parliament, even if they don’t like it and remove some of the legal protections senior people at the FSA have, so they can be sued in the same way as can directors and officers of every other type of organisation in the UK.

  11. Julian Stevens 5th March 2012 at 3:53 pm

    I have just sent my MP a print of this article and asked him:-

    Do you consider it in any way fair, Mr Williams, that the immediate consequence of referring to the Upper Tribunal for arbitration an FSA decision to fine somebody is that the amount of the fine will be increased by 43%?

    Please do not raise this with the FSA. Please raise it with your colleagues on the TSC.

    I commend others to do likewise.

    And Hector Sants would have us believe that the FSA has no prejudicial agenda against small IFA’s? White man speak with forked tongue, methinks.

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