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Alan Lakey: Like the FSA, the FCA is not accountable

As an industry we tend to be excellent and creative, particularly when it comes to grumbling, bemoaning the state of the industry and raging against the multiplicity of aggravations that perpetually torment us.

Many of us find solace in posting on the blogs with some going further and contacting MPs, penning letters to publications and quangos and even threatening judicial reviews.

Consider the matters that may have concerned us in recent years – the RDR, the FSCS, the FOS, Arch Cru, Keydata, regulatory spendthrifts, five star hotel jaunts and the like – and the generally failed attempts to put right what we see as an injudicious use of power.

This repetition of grief has a common thread; in every instance the ability to impose crazy rules, apply sanctions, levy fees and spend freely is enabled by the total lack of accountability that FSMA affords.

Thus I was intrigued by appendix 2 of the recent FCA Business Plan for 2013/14 which focuses on accountability and transparency.

I was amused to read that the work of the four independent panels, the Financial Services Consumer Panel, Financial Services Practitioner Panel, Smaller Businesses Practitioner Panel (SBPP) and the Markets Practitioner Panel, “Helps keep the FCA accountable to the industries and markets we regulate”.

Is this a realistic prospect? By way of example, the FSPP has a secretariat based at Canary Wharf and considers itself a ‘critical friend’ of the FCA which has to consider any representations made to them by the panel but, naturally, the FCA is able to reject such representations in much the same way that the FOS is able to ignore the provisions of Statutory Instrument 2326.

In this respect the regulator’s task is made easier as it appoints both panel members and its chairman.

What good is oversight if the views and recommendations of the various panels can be ignored or brushed aside with impunity?

In my world, and I guess that of most readers, ‘accountable’ means being held responsible for your actions with consequences. According to Wikipedia, “In ethics and governance, accountability is answerability, blameworthiness, liability and the expectation of account-giving”.

In our world the FCA is answerable to nobody, as it can ignore Parliament, the Treasury, the Joint Committee on Financial Services, the industry, the OFT and the press.

Under FSMA, the FCA is immune from liability for negligence; unless it can be proved that it acted in bad faith, something that is virtually impossible to demonstrate.

As with the FSA there is no accountability and neither the Treasury nor Parliament is able to stop it when it elects to do something stupid.

Last year Andrew Tyrie lambasted the FSA, saying: “The fact that a non-elected public body would so hastily dismiss recommendations from a parliamentary committee raises concerns about the accountability and culture of the FSA.”

The recent parliamentary debates on the FCA denied the opportunity for statutory oversight of the FCA in any meaningful manner. To ensure that autocratic foolishness and venality can be challenged there needs to be a truly independent oversight body which has the power to stop such behaviour and apply redress where appropriate. In short, a financial services star chamber.

It is early days for the FCA and it may prove startlingly more competent and sensible than predecessor regulators, nonetheless without appropriate checks and balances the potential for adviser detriment signifies a Defcon 1 alert.

Alan Lakey is partner at Highclere Financial Services


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. Keep me guessing 10th April 2013 at 2:06 pm

    Alan, great article, but I would of thought a Man with your brain power, would of known, that the change from FSA to FCA, is only 1 letter & nothing else will change.
    An Unaccountable, do as I like Authority.

  2. Alan Said “It is early days for the FCA and it may prove startlingly more competent and sensible than predecessor regulators”

    With a 15 % hike in regulatory fees and a 20% plus reduction in advisers and still going down, how exactly is going to prove more competent and sensible if there is no accountability, no statutory control of their actions and the same people who screwed up the industry and banking sector in the FSA are now working for the FCA.

    I despair.

  3. Alan

    I too hope that the new FCA does a better job than the old FSA and am willing to give them the benefit of the doubt. The only thing that I do find a little bit concerning is that the new regulator seems to have the same viewpoint on authorisation as the old FSA.

    I really would like the FCA to enforce the FSMA2000 on authorisation and have a crackdown on all lead generation firms that don’t have authorisation or proper introductory agreements with an IFA. The worrying thing is at present the FCA seems to give exemption to marketing firms advertising for financial advice leads while giving IFA’s a hard time on the use of social media.

    Surely both should be governed by the same rules!!!

    Maybe this is something you would like to bring up at the AIFA as I think this is a very important issue for IFA’s – unless authorisation rules are enforced what point is there having authorisation under the FCA.

  4. Surely the best way to figure out if the FCA will be any better than the FSA is to look at who worked for the FSA and who is now working for the FCA. I for one can only think of one person that has left and he only went because he was offered a better job.

    Basically we have exactly the same people regulating us now as we did on March 31st. What makes you thinks this leopard has changed it’s spots overnight?

  5. There has been a war of independance before and the reason for it was “Taxation without Representation”. When the FCA takes taxes off of IFA firms and then the Govt via the Treausury purlions those same taxes and then uses it to fund it’s armed forced, contrary in the case of Iraq, but not neccessarily Afghanistan of the wishes of the majority of it’s people who then VOTE to replace the party who started the war (Nulibor) only to get a party which instead of reforming the FSMA 2000 just change them name and make it even more unaccountable, then we may be needing to play Allied Dunbar adds again i.e. There may be trouble ahead….. sing along now

  6. @ Ned Naylor – Yes, you are correct, I penned the article before this news broke.

    @ Peter Herd. Peter, for once I agree with you.

  7. What on earth did you expect Alan?

    If the FCA did what should be done they would not exist at all and all those nice salaries and jobs would go.

    Regulation is totally flawed but sadly when you have Government and indeed the big hitters in the industry all so inter-twined (look at the FCA Chairman and where he came from) it is no wonder we have the mess we are still in.

    Sadly the only way to change it is to get into power (e.g. Government) or for the whole thing to collapse on itself, which those in control will do anything and everything to avoid (at others expense of course).

  8. Alan

    As we have previously discussed, not holding my breath with FCA particularly now they don’t like the fact that my clients ‘like’ me !!

    I’ve decided to kick every client in the B*llocks as they walk in to make sure that I am complying with the Regulator.

    @ Peter Herd – you’re back then ? with your sensible head on then Peter – well done for once I agree with you too – don’t make a habit of it !!

  9. Alan, the whole assault on our freedom by the FSA/FCA with the backing of government, is down to Fabian Gradualism, so beloved of labour governments and now underpinned by the conservative government.
    “The Fabian strategy is a military strategy where pitched battles and frontal assaults are avoided in favour of wearing down an opponent through a war of attrition and indirection. While avoiding decisive battles, the side employing this strategy harasses its enemy through skirmishes to cause attrition, disrupt supply and affect morale.
    In politics, gradualism is the belief that change ought to be brought about in small, discrete increments rather than in abrupt strokes such as revolutions or uprisings” Wikipedia.
    We need a leader who will fight against this creep of quangos who threaten our democratic rights.

    This is no time to engage in the luxury of cooling off or to take the tranquilizing drug of gradualism. Now is the time to make real the promises of democracy.
    –Martin Luther King Jr

  10. Your article, Alan, eloquently reinforces my repeated calls for the creation of an Independent Regulatory Oversight Committee, with the unassailable authority to say to the regulator either: This is wrong and you aren’t going to do it or You’ve screwed up on this and you’re going to have to put it right PDQ, on which the Committee will expect your report in 3 months time.

    Given that nearly all of its direct appeals to the regulator have failed to secure any meaningful response, isn’t this what APFA should be aiming for?

  11. Personally, I think the FCA should stick to what they say they do according to their SIC code registration at Companies House under “Nature of Business”…

    84120 – Regulation of health care, education, cultural and other social services, not incl. social security

    I kid you not, check it out for yourself, company number 01920623.

  12. My word – head out window looking for blue moor or flying pigs. Alan & Peter agreeing?
    FCA need to be accountable. Govt need to decide on need for advisers to give advice. Are they in or out? If they are in, Govt and by association the FCA need to make the conditions right for advice rather than as it is, smothering it. At last Alan & Peter (and a metaphor for all advisers – IFA & Restricted) agreeing. A united front to Govt needs to be made with severe lobbing to make conditions right for advice. We are running headlong into a country with no provision for savings or family protection due to politicians lack of understanding how products are Sold…. yes SOLD!!! Govt are being lead, sleepwalking into a situation where our country will become a third world state because of homelessness (lack of mortgage protection), more poverty in retirement (lack of meaningful pension provision), general poverty (lack of emergency savings) and a lot more related to product not being recommended by advisers.

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