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CII criticises FSA plans for firms to vet staff

The Chartered Insurance Institute has attacked the FSA’s proposals to shift responsibility for vetting new employees onto firms, arguing the move could increase misselling.

In its recent consultation paper 05/10 on changes to the FSA Handbook, the regulator suggested dropping “customer controlled functions” from the regulatory regime where individuals are dealing with retail and wholesale customers. The customer controls functions aim to ensure that firms who appoint an approved person to carry out defined functions for customers, must first clear the appointment with the FSA.

CII director general Sandy Scott says vetting individuals dealing with customers is the duty of the FSA, not the firm. He says the decision to pass this responsibility to firms will lead to a rise in misselling and increased costs levied on firms through the Financial Services Compensation Scheme.

Scott says: “We believe that reduction in regulatory standards to achieve short-term cost savings is a false economy. The FSA should think again.”

Wilson Dean Financial Services director Nick Lincoln says: “I’m normally all for cutting regulation but this would mean increasing the workload for us and decreasing the FSA’s workload. It is a lot to ask small IFAs to carry out these checks, especially when the FSA has the resources to do it.”

FSA spokesman Robin Gordon Walker says: “Consultation is closing on the October 31 and we will consider all the responses. We will produce a policy statement in the new year.”

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