Advisers have slammed plans to allow bank staff to approve their own sales staff, saying it is effectively “outsourcing” regulation.
Currently, the approved persons regime requires all consumer-facing staff in banks and advisory firms to be approved directly by the FCA as having sufficient qualifications and being a fit and proper person.
A consultation paper from the Prudential Regulation Authority and the FCA, published last week, is proposing senior staff in banks, building societies, credit unions and large investment banks remain directly authorised while other staff are certified by their employer.
The move is a result of the Parliamentary Commission on Banking Standards report, published last year, which called for reform to the approved persons regime so firms take more responsibility for the fitness and propriety of staff. The regulator is required to implement the proposal as the Government included it in the Financial Services (Banking Reform) Bill.
But Clayden Associates director Dan Clayden says it is a mistake.
He says: “There is always a clamour when something goes wrong to change things but that is not always the right thing to do.
“There are areas where a lighter touch may be beneficial, such as simplified advice, but oversight of bank staff is not one of them.”
Susan Hill Financial Planning chartered financial planner Susan Hill says the misselling scandals of the past show banks cannot be trusted to certify their own staff.
She says: “They are still in the naughty corner and I’d keep them there. Advisers are working really hard on consumer trust and if we let the banks off the hook we will all suffer and there will be even more misselling. How many [staff] are they not going to approve?”
Investor Profile financial planner Jaskarn Pawar says: “This looks like outsourcing regulation. A firm will hire someone on one set of objectives and the regulator may see it with different eyes.
“So to ask the firm to do what the FCA would do is difficult because they are not in the same business.”
Under the proposals, all staff would still have to meet the same regulatory requirements but Hill says ceding responsibility to banks for ensuring the fitness and propriety of staff could see these reduced over time.
“They will end up agreeing with the regulator that they can have in-house exams and that is not going to work,” she says.
The paper says the certification responsibility on firms will apply to individuals in customer-facing roles which are subject to qualification requirements. It says: “These are roles where the FCA is concerned about the risk to consumers from staff without proper qualifications and where the FCA would want to make sure that proper checks that these qualifications had been achieved were completed.
“Ensuring firms check that such staff are fit and proper will also support the RDR and Mortgage Market Review.”
Advice failings: Can banks be trusted to set standards?
March 2014: Santander fined £12.3m for failing to consider investors’ risk appetites and to regularly check on-going suitability of investments.
December 2013: Lloyds TSB and Bank of Scotland fined £28m for serious failings in systems and controls governing financial incentives for sales staff.
September 2013: Clydesdale Bank fine £8.9m for failing to treat mortgage customers fairly
May 2013: JP Morgan fined £3m for systems and controls failings relating to retail investment advice and portfolio investment services.
October 2012: Bank of Scotland fines £4.2m for system failures which meant it held inaccurate mortgage records for 250,000 customers.
February 2012: Santander fined £1.5m for failing to clarify Financial Services Compensation Scheme coverage from structured products.
December 2011: HSBC fined £10.5m for failings in investment advice provided by NHFA.
May 2011: Bank of Scotland fined £3.5m for the mishandling of complaints about retail investment products.