Aifa is lobbying MPs for a cap on regulatory fee increases and a review of the new accountability arrangements.
In a briefing note sent to MPs ahead of this afternoon’s debate on the Financial Services Bill, Aifa says future fee rises should be capped and that the Treasury should have to sign off on any rises above the cap. Currently the FSA sets its own budget.
Aifa is also calling on the Government to commit to reviewing accountability measures for the new regulators after three years.
The paper says: “Aifa is fearful that the costs of regulatory reform are not fully recognised and predict ever increasing cost pressures befalling our members as a consequence. The FSA have just announced a 15.6 per cent increase in fees. Aifa believes the scope of future fee rises should be capped, for example at CPI + 1 per cent, with larger increases needing Treasury approval.”
The note says a review of regulatory accountability is needed after three years to “see whether the FCA is serving customers’ interests in supporting a vibrant financial services sector”.
Labour, the Treasury select committee and the joint committee on the draft financial services bill have all raised concerns about the accountability measures being put in place for the new ‘twin peaks’ regulatory regime which will see the FSA replaced by the Prudential Regulation Authority and the FCA.
Aifa is worried FCA powers to publish early warning notices that it is investigating a firm could lead to “severe” reputational damage to firms who are later found not to have broken any rules. The note says: “A more appropriate balance needs to be achieved between early intervention and the treatment of firms. We recommend the FCA introduces a clear process that will make explicit that firms are exonerated when it is concluded that no wrongdoing has taken place.”
Aifa also continues to push for a 15-year long stop for advisers. It says: “The lack of any cap on advisers’ liability means that firms, particularly smaller ones, have the burden of making provision within their accounts for the increasing risk of complaints as well as the proposed increases to capital-adequacy provisions. Additionally, it impedes investment in the industry.”