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