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Aifa wants closer look at splitting regulation

An atomised approach to regulation, with a number of industry regulators reporting to a college of supervisors, could prove beneficial, says the Association of Independent Financial Advisers.

In its Future of Financial Regulation paper, Aifa says, under this approach, Cob regulation would be divided into market sub-sections, such as investment, mortgage, general insurance and stockbroking. The sub-sections would report to a self-regulatory organisation and, on a higher level, a college of supervisors acting as an alternative to a statutory regulator.

But Aifa adds it is concerned that dividing prudential and Cob may lead to a duplication of regulatory oversight and says it is keen to investigate further what the twin peaks’ approach could mean for the industry, consumers and members.

It says: “There has been much talk of separating out regulation of firms from consumer protection and this interesting notion needs further review. There are also other aspects that need to be played out such as the split between prudential and conduct of business regulation.”

Aifa also supports calls for the Bank of England to take over macro prudential and financial stability regulation from the FSA, saying this is “a surefire way to ensure the financial system is not again allowed to become dangerously overleveraged”.

Baronworth director Colin Jackson says it is essential there are prescriptive rules and regulations under the new approach.

He says: “I support the idea of dividing regulation into sub-sections under the atomised approach because it would mean that the rules are relevant but I am strongly opposed to having more than one regulator.”

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