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