Treasury select committee chairman Andrew Tyrie says it is “absurd” for advisers and other regulated individuals to still use the “discredited” approved persons regime when it is being abolished for banks.
The Government is replacing the approved persons regime for deposit taking institutions – such as banks, building societies and credit unions – with a senior management regime.
The aim is to introduce far greater individual responsibility and reverse the burden of proof so senior staff have to prove they are innocent.
The Treasury had initially planned changes for the entire sector in July but changed its mind in October. Experts have warned scrapping the regime for advisers could cost millions and take more than two years although the Treasury says there would be no re-authorisations.
Speaking in the House of Commons yesterday, Tyrie said: ”Everyone agrees the approved persons regime adds little or nothing. Yet over the past few weeks we have discovered this discredited system is going to survive in legislation.
“In doing so the regulators are, in my view and many commission members, perpetuating a myth that the approved persons regime affords any real protection.”
Tyrie said the regime will still apply to more than 20,000 financial services staff such as fund managers and some banking staff.
He said: “That is unfinished business as the banking commission only had a remit for banking. But it would be absurd to have a regime for one part of financial services, which has so clearly failed in another.
“I do hope the Government will encourage the regulator to look again at this to extend the coverage of the new regime and remove the approved persons regime.”
Labour has long called for a fiduciary duty to be imposed on all customer-facing financial staff, including advisers, in a bid to significantly bolster Treating Customers Fairly rules.