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Analysis: Hector Sants’ fright talk was badly judged

When FSA chief executive Hector Sants gave his now notorious speech warning that the financial services industry should “be very afraid” of the FSA, it marked a turning point in the relationship between the regulator and the regulated.

Sants is leaving the regulator at the end of June after five years as chief executive but will continue to be paid his annual £500,000 salary plus benefits until the end of December.

Ever since Sants was named as John Tiner’s successor in July 2007, he has fought an uphill battle. He joined the FSA in May 2004 as managing director of wholesale and institutional markets from Credit Suisse First Boston, where he was chief executive of Europe, Middle East and Africa. His investment-led background caused some to question if he was the right person to improve retail banking and see out the RDR.

The run on Northern Rock came just two months after he became chief executive. It was largely left to Sants to explain the FSA’s failures in supervising Northern Rock, which was taken into public ownership in February 2008. As the financial crisis took hold in September 2008, the finger of blame was pointed at the FSA amid mounting criticism that the regulator should have acted sooner to prevent it.

The result was Sants’ “be very afraid” speech in March 2009. He said: “There is a view that people are not frightened of the FSA. I can assure you this is a view I am determined to correct. People should be very frightened of the FSA.”

Lansons director of regulatory consulting Richard Hobbs says: “Sants will be remembered for the ’be very afraid’ speech. In effect, because the FSA is a political football, the regulator was trying too hard to use rhetorical flourish as a substitute for immediately visible credible action. The speech was ill-judged and brought the FSA resentment.”

That was aggravated by a series of appearances by Sants in front of the Treasury select committee as part of its inquiry into the RDR. Giving evidence to the committee in November 2010, Sants told MPs that losing up to 20 per cent of the IFA population was “acceptable” to deliver the improvements from the RDR. His subsequent apology last March failed to pacify advisers’ anger.

In November 2011, Sants was forced into another apology, this time for the FSA’s abrupt dismissal of TSC recommendations that the RDR should be delayed by a year, before the recommendations had even been published. MPs branded the ensuing apology “hollow”.

Tenet distribution and development director Keith Richards says: “Sants’ personal handling of the TSC’s RDR review last year was disappointing and unnecessary. It demonstrated to MPs the FSA had no regard for anyone’s view but its own.”

But Cicero Group director and chief corporate counsel Iain Anderson believes Sants will also be remembered for driving change at the regulator in the wake of the financial crisis.

Sants has not only been responsible for the transition of the FSA to become the Prudential Regulation Authority and the Financial Conduct Authority but also in hammering home the message that the regulator will look to intervene earlier to prevent consumer detriment.

Anderson says: “We have moved from light-touch regulation to early intervention, where the regulator is aiming to be all-seeing and all-knowing. That is a huge change, and not just in the organisation’s structure but also in the regulator’s modus operandi.”

Sants’ achievements

  • Overseeing the FSA’s transition to the Prudential Regulation Authority and the Financial Conduct Authority as part of the regulatory restructure
  • Bringing in an era of intensive and more intrusive regulation, marking a shift away from light-touch regulation

Where Sants got it wrong

  • His warning to the industry to “be very afraid” of the regulator in March 2009
  • Telling the Treasury select committee that losing up to 20 per cent of the IFA population is “acceptable” in order to deliver the RDR
  • The FSA’s dismissal of the TSC’s recommendation to delay the RDR by a year, before the TSC report had been published

’Overpaid, over-rated and overdue departure’ – advisers give their views as Sants quits

He has always struck me as arrogant and unwilling to listen to anyone who does not agree with him. I will not be contributing to his leaving present, unless one includes all the money I have paid in my FSA levies. Good riddance.

Simon Bligh

No one person has done so much damage to our industry and to the public as this man.
Stuart Duncan

So he is running away before he sees the RDR fiasco through. There is still far too much change being implemented too quickly that will be massively detrimental to clients.
Stephen McDine

This is excellent news but we need to be careful what we wish for. There are plenty more where he came from.
Keith Jayne

Overpaid, over-rated (certainly by Turner) and an overdue departure.
David Milne


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There are 10 comments at the moment, we would love to hear your opinion too.

  1. “But Cicero Group director and chief corporate counsel Iain Anderson believes Sants will also be remembered for driving change at the regulator in the wake of the financial crisis.” Excuse me but what part does Ian Anderson play in financial services? Oh, he is a paid spin doctor for governments and financial departments!
    Sants and the FSA have actually no redeeming features.
    They in their own admission took their eyes of the banks to regulate TCF on brokers.
    They are appointed from the banks and they leave to take up positions in banks.
    They have the huge salary and bonus culture of the banks.
    They have completely sidelined their remit to look after consumers and promote the flourshment of well regulated financial advice to ensure the banks have more control and presence in the wider financial market segments.

  2. So apparently his “achievements” have been a) to oversee the delivery of something that we haven’t seen yet? I guess that goes in the “got wrong” box if it doesn’t work? And b) Usher in “intensive and intrusive intervention” which has yet to prove if it will work?

    It’s hardly a ringing endorsement of the chap, is it?

  3. An arrogant man with his own agenda for getting his name in the history books. He and his previous cronies decided what they wanted to do and drove that home without taking any actions to slow things or change things even after the whole industry pointed out the countless flaws and unintended consequences of his blessed RDR. Now, shortly before he announced his recognition he and Lord Turner admit that there will be some for whom taking financial advice will not be commercially viable. He pressed on with it without taking notice of TSC who made a very sensible suggestion that it should be put on hold until FCA take over as they will have to oversee it but he told them to bog off, now he’s bogging off. So when the RDR is shown to be the flop that everyone outside the regulator sees its going to be Mr Wheatley can say “I had serious miss-givings about the RDR but it was in place before my watch started” and so the never ending debacle of failed regultion will continue. How any person can think he deserves credit is beyond me. I think the public should know just a mess is coming and who is totally resposnible for it.

  4. Im aware of the need to publish articles that will be read by as large an audience as possible, but this is a very one sided point, backed up by blog comments from your very own website. Not sure where the article is going or what your looking to achieve, im sure all that will happen is you will recieve similar posts to the ones cited above. Why not take a more pointed approach MM? You seem to be falling into this trap more and more recently.

  5. “Be afraid of the FSA”
    Sounds about right, it will also apply to the FCA as well when that bunch of neer do wells takes over.

    The regulator is the biggest threat to this industry’s growth and prosperity and IFAs in particular that has come about in the last 22 yrs since I became an IFA.

    2013 should see a reduction in retail investment particularly in personal pensions for the average consumer who has lost faith in the ability of the industry to produce growth and the decreasing importance of pension planning as opposed to survival will see many more people stop contributions.

    Without consumers buying into and / or purchasing products with advice, the banks and direct providers will have a field day / year / century.

    The sheer blind arrogance and unwarranted unearned self belief these people have in their own inadequate abilities frightens me and so it should, they are not accountable in law for what they do wrong, there is no mechanism whereby an IFA can defend themselves against massive arbitrary fines and no limits on our liabilities, apparently even in death, our estates could be sequestered because there is no long stop on complaints.

    What daft way to run the most important commercial industry in our country.

  6. When I left my last company, I had a non-contact clause in my contract that lasted one year. When I resigned I could not use my knowledge of these clients to earn an income.
    When Hector, and others, resign from the FSA, they are not allowed to use their knowledge when working for another firm for 6 months.
    If this is fair for me, why is it so unfair for FSA executives that their contracts include statitury gardening leave? I know the answer really because they write and approve their own contracts, and what turkeys vote for Christmas?
    Why is it that the only defined benefit pension scheme that opened last year was the FSAs?
    When lecturing IFAs on ethics, practices and openness, look in a mirror.

  7. What value can we place on these opinions from the likes of Lansons, Tenet and Cicero? Or anybody else who makes it all up in order to get in the papers…

    Sants is as disposable as anybody else the Treasury puts in these high profile positions but they very rarely end up worse off.

    The question we need to be asking now is what does the future hold for what is left of this industry.

  8. MoneyMarketing

    Boring old stuff! change the tune and stop winding IFA up!

  9. Anyone seen the e-petition asking for HS to be prosecuted?

  10. “Overseeing the FSA’s transition to the Prudential Regulation Authority and the Financial Conduct Authority as part of the regulatory restructure.” HS also announced that the FSA’s estimated cost is a staggering £50m.

    “Bringing in an era of intensive and more intrusive regulation, marking a shift away from light-touch regulation.” Not many IFA’s would consider the FSA’s regulation to date to have been light touch. What it’s been is manifestly one-sided, with IFA’s regulated to the brink of extinction whilst the banks alone have enjoyed light-touch regulation. The succession of large-scale motorway pile-ups bears ample testimony to this, yet the FSA seems more intent than ever on strafing the already hard-pressed IFA sector. How about some more balance and fairness in the FSA’s regulatory strategy?

    The Regulators’ Compliance Code is a central part of the Government’s better regulation agenda. Its aim is to embed a risk-based, proportionate and targeted approach to regulatory inspection and enforcement among the regulators it applies to.

    Our expectation is that as regulators integrate the Code’s standards into their regulatory culture and processes, they will become more efficient and effective in their work. They will be able to use their resources in a way that gets the most value out of the effort that they make, whilst delivering significant benefits to low risk and compliant businesses through better-focused inspection activity, increased use of advice for businesses, and lower compliance costs.

    But no, the FSA’s having none of that. It’s gotta be just more, more, more of everything.

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