It is impossible for the FSA to implement regulatory dividends for IFA firms under its current fee system, says Lansons regulatory consulting director Richard Hobbs.
Last month, the Personal Finance Society renewed its calls for regulatory dividends to reward firms that implement higher professional standards.
But Hobbs says rewarding firms with lower regulatory fees goes against the levy system, which is designed to share losses among a big group.
He says: “Regulatory dividends are a nice idea but one incapable of any practical implementation. The concept of a levy is to neutralise loss around a market.
“It is the nature of neutralisation that you are sharing a loss among a large number of people who by and large did not contribute to it.”
Hobbs adds that a levy scheme based on a system where firms pay more if they are more likely to fail may lead to volatility as those firms could be the least likely to pay.
Chartered Insurance Institute director of policy and public affairs David Thomson suggests dividends could go bey-ond fees and could be in the form of lighter-touch regulatory visits for chartered firms.