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Advisers slam plans to allow banks to approve own staff

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.


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. This is lunacy and a scandal in the making. The drive for a profitable financial advice service will by default put pressure on middle managers and sales staff who in turn will look for the quick buck. Five years from now a new pair of eyes at the FCA (or whoever they are then) will wonder ‘what was we thinking’.

    Haven’t we been through enough scandals and disasters? Lets not make another mistake and lets do the authorisation right the first time and ensure consistency.

  2. Given that the Directors and Chairmen of Banks refuse to act with integrity or with ANY Ethics – and remain largely uncontrolled as a result of their abuse of Banking Regulations – their attempts to take FULL CONTROL OF PEOPLES SAVINGS. . .the Prudential Authority has arrived a reasonable conclusion. Banks are NOT FIT FOR PURPOSE . ..and their Directors require incarceration at best. One example for deterring fraudulent bankers and their employees – is similar to Heavy Goods Vehicles services owners . . . whose Directors are given a ” suspended ” prison sentence – for manipulation of tachographs etc., whose Class 1 lorry drivers – are exceeding the permitted Rules and putting at RISK all members of the public as a result of the Sloth of their management and their refusal to take their repsponsibilities . . . seriously . Remember Potters Bar Rail disaster . . . . . the IMPACT ON THE INNOCENT . . . . .Let the Rule of Law prevail . . . .and lock these inept directors and senior management – have their White Collars ” Felt “. Lock them up . . . . . !

  3. This is lunacy and a scandal in the making. The drive for a profitable financial advice service will by default put pressure on middle managers and sales staff who in turn will look for the quick buck. Five years from now a new pair of eyes at the FCA (or whoever they are then) will wonder ‘what was we thinking’.

    Haven’t we been through enough scandals and disasters? Lets not make another mistake and lets do the authorisation right the first time and ensure consistency.

  4. I think it’s very precipitate to assume that the FCA has absolved itself of responsibility. It’s merely delegating onto senior staff and compliance officers responsibility for authorising only the right people in the first place and then that those they’ve authorised conduct themselves in an appropriate manner.

    The FCA will certainly check from time to time that this is the way it’s being done and woe betide those who fail to ensure that it is.

  5. Look the FCA need someone to carry on issuing large fines against so they can carry on there lavish lifestyles, let the banks self regulate wait a bit investigate fine 10 mil happy days problem is we are all f—ed for XMAS fellas as Financial have no money HA HA

  6. The banks have friends in high places, and this is one way to undermine the objectives of RDR, which was supposed to increase professionalism and benefit those advisers who had taken the time to achieve higher qualification levels.

    As many commentators have already pointed out, banks are there to make profits and fill their pockets by whatever means, indeed my recent experience of dealing with the asset management division of a major bank was not a comfortable one, the representatives being under pressure to gain commitment to using their funds and wanting me to notify them if I placed any business with them.

    Having also worked for three banks I have been on the end of the pressure to meet targets and whatever the FSA/FCA may have to say about sales incentives, the culture will not change and customers will continue to receive poor advice in order to meet targets. It is true that there are also independent advisers who are also not up to the standard required to give quality advice, but they are fewer in number than those that the banks will self certify.

    Accepted that keeping the senior staff directly authorised should keep them in line, what about LIBOR fixing, PPI and all the other scandals where the senior staff were happy to turn a blind eye and collect their bonuses? If it means the FCA can reduce staff and cut costs by having less individuals to regulate then we should benefit from lower fees, or not!

  7. The banks and the insurance companies appoint senior Troy Grandees to be their Chairman – and undermine FCA Rules. The latest is an old FSA boss possibly joining Barclays. I suggest that those who undermine or are caught, being unethical or deceitful or negligent ion their DUTIES OF CARE AND RESPONSIBILITY – get a suspended PRISON SENTENCE, or perhaps just suspended ( in the form of Gallows ? ) – for their deceit and their Fraud against their customers. It is interesting that insurance companies only had to put people back in the position they were in prior to the fraud of selling an inappropriate product ( Endowments and Pensions ) – and the churning of these ” long term investments”. Endowments ( like LIbor ) being fiddled with on investment rates etc., without notifying the CLIENTS of the INHERENT RISKS of these malicious strategies – designed to deprive savers and investors by the most sinister deceit. Like MP’s their fiddling is found to be acceptable in these pyramid selling techniques – the few at the top benefitting whilst those at the lowest end ( the base of the pyramid ) – fund the others . . . . .and cross subsidise . . . .those at the top. Multi Level Marketing . . . !
    The pressure to meet targets – to fund the extravagant and unethical lifestyles of those at the top – protected by MP’s – Parliament – and the treasury department – and the Bank of England – ALL OF WHOM REFUSE TOTAKE THEIR RESPONSIBILITY seriously . . or at all. No wonder the Scots want devolution – to take CONTROL and get away from these Tory Disasters – lack of strategy lack of a plan – and the reduced productivity for employers – because the adminsistration burden ( applied by people who have no idea about What they are doing ! IE MP’s ). For example Independent Fianncial Advisers numbers reduced – to under 20,000 – New business ( at standard life up 12 % before taxation ) – and the FEW Professional practices left are increasing their profits . . . .at the expense of the MASSES – who are being deprived – a direct result of SEGREGATION – SEPARATION and bringing back – the Upper Classes and class society – advice for the FEW under RDR – a result of restrictive Trade Practices of the FCA . the FSA the PIA . . . . . .all designed to destroy Control – Remove CONTROL over your own finances . . . by Lures . . .and deceitful marketing permitted under Advertising Standards. EG BT infinity have failed to provide any broadband service since 27th July 2013 . . . .the chairman chief executive sales director and Finance director – are ALL AWARE – and have DONE NOTHING . I would refuse to refer anybody to BT because their systems are faulty – their service abysmal – and their Directors unethical – malicious and DESTROY BUSINESSES ( all with protection of David Cameron and Ann Main MP ) . BT is a monopoly out of control and OFTEL refuse to investigate.

  8. The banks may have friends in high places, but the vast fines that the government is now raking in from them for their past misdeeds suggests that these friendships are no longer anything like as useful as they once were. Also, the FCA these days is looking more critically than ever at incentive schemes and corner-cutting to meet steep targets.

  9. In the press this week Lloyds bank staff admit to misselling to meet sales targets. Case proven, the FCA should not allow the banks to approve their own staff who stand to lose their bonuses and jobs if they fail to meet targets.

    It is the senior staff who hand down the targets, how can they be trusted to enforce competence and compliance? Big job if the FCA really think that they can control their behaviour.

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