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Imagine it then became clear that, prior to FSA regulation, one of the firms had been operating under the false impression that it was regulated and that misselling may have occurred while it was operating in a regulatory no-man’s-land. How should the firm respond and how should the regulators – by that we mean the FSA and the Financial Ombudsman Service – treat the firm if it suggested that everything would be all right? It had put everything right some years later, so what was the problem with backdating the authorisation? Most advisers would suggest that such a firm should be given remarkably short shrift. It might find itself in hot water for its blase attitude to regulation and it would probably be told that, even though it was a different entity at the time, it still carries responsibility. But what if it was the regulator itself that made the mistake? Of course, that is different. Poor FSA. It cannot help it if the PIA, Imro and all the rest made a bit of a mess of things, even if it is staffed with many of the same people. Anyway, there was this messy transition bit before N2, when the FSA got its real powers. As reported in last week’s Money Marketing, a court case has turned on the FSA’s inability to say whether a firm, in this case Colonial Mutual, was regulated by the PIA or not, as it did not have a section 44 agreement. This point turned out to be crucial in deciding whether the court could offer compensation following allegations of misselling. In a series of letters to MPs and the claimant’s solicitors from the FSA, some of which are printed in this week’s Money Marketing, it is suggested that the firm had permission. One PIA letter appears to come pretty close to backdating the firm’s status in a hand-written scrawl, in what looks like regulation by Post-it note. Finally, the FSA admits that it cannot demonstrate that Colonial Mutual was regulated and the case is won for misselling. IFAs, with heaving filing cabinets and and now computer files documenting their every move over the last few years, must be livid after years of being warned about record keeping. There must be many an adviser who has protested his or her innocence of misselling and claiming every good intention, only to have to face the full penalty for not being able to prove it and with no excuses tolerated. In this case, no one is accusing anyone at the FSA of lying to MPs or to any individuals but the story does reveal a very poor attitude to admitting past regulation may not have been quite up to scratch. It also shows a certain disregard for the little man. The FSA, in its series of letters, shows a remarkable sort of “that’ll do” attitude despite the fact that the matter was of huge importance to the individuals concerned, to such an extent that they were prepared to take the matter to court and, we believe, risk losing everything to do so. Once again, as in so many other matters, the FSA appears to apply double standards. As an organisation, it does a lot of good for confidence in the market. But, in this case, it does appear to be exhibiting a psychological flaw that stops it seeing its own mistakes and, ironically, given what advisers have to do, refusing to take any responsibility for its regulatory forebears.