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Alan Lakey: Who’s regulating the regulator?


There is continual grouching and cursing over the FCA’s apparent ability to avoid attempts to curtail its excesses and bring it to book for dubious practices. 

Many now want an independent body to oversee the FCA’s performance and expenditure, and with enough clout to halt foolish endeavours and unbalanced regulation.

The Regulators’ Code was introduced in April 2008 to outline the obligations on those bodies charged with controlling or policing members. Organisations affected by this included the FSA, OFT, Ofgem and Ofcom, as well as local authorities.

The code has clearly failed. Although it made some harsh barking sounds, in practice it was all gums and no teeth. A 2013 consultation on its effectiveness resulted in an adjusted code, which is likely to come into force in April. 

The Government, in its response to the consultation, states: “The new Regulators’ Code establishes a clear and accessible framework that encourages greater transparency about the way regulation is delivered. It seeks to enhance the relationship between regulators and those they regulate, encouraging trust, open dialogue and accountability, and allowing regulators’ resources to be focused on the non-compliant.”

Many have complained that the FSA ignored the previous Regulators’ Code and maybe this explains why, other than Apfa and NFU Mutual, other financial services organisations did not feel they needed to comply either.

So what is in the new code? It is mainly a watered down version of the old code, asking regulators to consider:

  • Supporting economic progress;
  • Undertaking a risk assessment of their activities;
  • Providing information and advice in such a way that enables businesses to clearly understand what is required by law;
  • Performing inspections only after a risk assessment, so resources are focused on those least likely to comply.
  • Collaborating with other regulators to share data and minimise demands on businesses.
  • Applying the Macrory Principles on penalties regarding formal enforcement actions and sanctions.
  • Increasing regulatory transparency by reporting on outcomes, costs and perceptions of their enforcement approach.

Certain aspects of the code will resonate with advisers. For example, section 1.1 requires the FCA to avoid imposing unnecessary regulatory burdens through its activities. Naturally the definition of ‘unnecessary’ remains elusive.

As before the basis of the code is well-meaning and if the FCA follows it implicitly life will be easier for most advisers. The problem is that the previous regulator ignored it at every turn, showing such a fundamental disregard for it that it did not even bother to respond to the 2013 consultation.

The code finishes with the statement: “The Government is committed to making sure the Regulators’ Code is effective. To make sure the code is being used effectively, we want businesses, regulated bodies and citizens to challenge regulators who they believe are not acting in accordance with their published policies and standards.” 

The FCA may well take a different view to its predecessor and properly implement the code’s principles but there appears to be no policing of the code and the FCA is immune to any sanction, directive or outside opinion. So if it does decide to ignore it there is nothing anyone can do about it.

Alan Lakey is partner at Highclere Financial Services



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Derek Bradley ceo Panacea Adviser 28th March 2014 at 9:48 am

    As stated above by Alan, this is a Statutory Code of Practice and came into force on 6 April 2008 by virtue of the Legislative and Regulatory Reform Code of Practice (Appointed Day) Order 2007.

    So where did it all go wrong, pages 11 and 12 are a very relevent starting point, section 3.1 states –

    Regulators should consider the impact that their regulatory interventions may have on economic progress, including through consideration of the costs, effectiveness and perceptions of fairness of regulation. They should only adopt a particular approach if the benefits justify the costs and it entails the minimum burden compatible with achieving their objectives.

    section 3.3 states that –

    Regulators should consider the impact that their regulatory interventions may have on small regulated entities, using reasonable endeavours to ensure that the burdens of their interventions fall fairly and proportionately on such entities, by giving consideration to the size of the regulated entities and the nature of their activities.

    So, what does the Better Regulation Executive, who issued this code do?

    The Better Regulation Executive (BRE), at the Department for Business leads the Government agenda on better regulation with the aim of making life as simple as possible for businesses, charities and the public sector front line. BRE works with the rest of Government to:

    improve the design of new regulations and how they are communicated;
    simplify and modernise existing regulations; and
    change attitudes and approaches to regulation to become more risk-based.

    What this means is that they work with all Government Departments to ensure that regulation is transparent, accountable, proportionate, consistent and targeted. And that it gets the job done – without causing excessive cost or aggravation for businesses, public sector frontline workers and charities in the UK.

    Have the FSA read this? According to Money Marketing in 2010, an FSA spokeswoman says: “We have consulted widely on the retail distribution review and received considerable input from firms of all sizes, including a large number of small firms. We have taken their views on board.”

    So that is a “NO then”??

    Here is a link-

  2. The FCA’s simple one word synonym for “unnecessary regulatory burdens” is, to quote John Griffiths-Jones……….. pragmatic. So that’s okay then. Sorted.

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