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FSA confident of legal position on QCF level 4

The FSA says it has clear legal advice confirming it is able to enforce higher minimum qualifications for advisers.

Speaking at the Tax Incentivised Savings Association conference in London today, FSA director of conduct policy Sheila Nicoll warned advisers not to try to flout its retail distribution review reforms. She said it was disappointing that there are “still signs of denial or misplaced wishful thinking” that the proposals will go away.

She cautioned advisers that the FSA has clear advice that it can legally enforce a higher minimum standard of qualification.

She said the regulator can remove an adviser’s right to trade if they do not comply.

Nicoll said: “A word of caution for those who might think that they may successfully challenge our ability to raise qualification levels.

“I want to reiterate that our proposals are legal.

“We have the power to change our requirements if it is in the interests of protecting consumers, and we are entitled to remove an individual’s licence to trade if we deem them not to be competent.”

Nicoll also warned firms not to try and cash in via a closing-down sale on commissions.

She said the regulator has heard of firms trying to build up trail commission or take high up-front commissions before the new rules on adviser charging are enforced, but she said this kind of behaviour would be frowned upon, and the FSA would do thematic work in the run-up to 2012 to ensure that there was no consumer detriment resulting from it.

Nicoll said: “I want to pause to give a very clear warning to advisers who may be looking to flout our reforms or who may seek to maximise their own profit and rewards before our rule changes take effect, while not paying appropriate regard to the interests of their customers.

“We have heard that some firms, both providers and advisers, may see the period between now and implementation as an opportunity to build up business with trail commission to get round our proposals, or to suggest products in which they receive very high remuneration but which may not be the most appropriate for the consumer.

“We will take a very dim view of such detrimental behaviours and it is our intention to do some thematic work in the lead-up to the end of 2012 to make sure that consumers aren’t losing out.”

On alternative assessments, Nicoll said the regulator would continue to listen to proposals, but that alternatives must stand up to scrutiny.

She insisted that the RDR timescales are realistic. She said she was “concerned” about suggestions that the FSA might not have considered its EU obligations when putting together its RDR proposals, asserting that the regulator has been sure to keep Brussels informed and updated at every stage in the process.

Responding to concerns that reforms to adviser remuneration will exclude customers who cannot or will not pay a fee for advice, Nicoll said: “That is not our intention and we have said explicitly that charges can come out of the product.”

Nicoll also revealed that the FSA will be publishing another RDR paper next month, which will include a look at potential read-across of the proposals to pure protection and group personal pensions.


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There are 22 comments at the moment, we would love to hear your opinion too.

  1. believeitwheniseeit 18th November 2009 at 3:56 pm

    If this is indeed the case the”open and transparent regulator” should make the “clear legal advice public”.

  2. Under RDR we have to get be paid by client agreement perhaps all ifa’s should stand together and demand that our regulatory fees should also be agreed rather than being imposed.

  3. The FSA- ‘open and transparent regulator’ ?? Are you having a laugh? WIthout question an absolute joke of a regulatory body.

  4. The big question over compulsory qualifications has for some years been MiFID. The FSA a few years ago told LIA and CII that it was questionable whether, under MiFID, even the FPC could be retained as a compulsory regulatory requirement for IFAs, unless the other European Member States also adopted it. That was one reason why the initial approach to RDR stressed the industry raising its own standards through a single professional body, with the FSA incentivising membership of and conformity to the requirements of such a body. Clearly the interpretation has changed and it would be interesting to see the legal justification for this.

  5. As Micheal Caine said in the film ‘The Eagle Has Landed’ I can always tell a thorough going ****** when I hear one. Don’t worry Nicole, despite what you say, we do actually live in a democracy. We are not in denial, we just dont have the luxury of an index linked pension and a nice fat pay packet to fall back on like some people. These changes are not all bad, it is just the way they are being driven though at speed without regard to the effect it is going to have on established business models. Your threats are unecessary and smack of a regulator that is too powerful and lacks a real understanding of the real issues here. I would like to see some flexibility and understanding for those advisers that have tried their best and are nearly there but through no fault of their own are finding the timetable very demanding.

  6. Ministerium für Staatssicherheit 18th November 2009 at 4:54 pm

    Ministerium für Staatssicherheit, commonly known as the Stasi, strikes again!

    So the Stasi speaks! Please TCF FSA can we see the advice or is it on a par with Gordon Browns legal advice that the FSMA 2000 was compatible with the Human Rights? So solid was that advice that he ran scared when asked to disclose it!!!

    What is it with these bullies? This is a totally unnecessary and vindictive fight! Within six years plus most of their targeted IFAs will be out of this hellhole in any case and the FSA will be left wondering who will pay their fat cat wages!

  7. Rather frightening lady, I wonder why she and the FSA feel the need to be so aggressive. Just because you can do something, doesn’t make it right. Equally I think legal argument has often been proven to be open to interpretation and all too frequently those with an axe to grind only hear what they want to hear. I still don’t see why competent advisers with a good track record should be treated this way but it looks like we will be. I am not against better qualified advisers but there has been a lot of comment today along the lines of get real, FPC’s were simple, any fool could pass them. A bit simplistic but possibly true but takes no account that most of us have attended loads and loads of specialised courses every year since then, not to mention annual re-licensing and regular product upgrade examinations so to try and pretend, as many do, that we have done no studying since taking FPC’s to stay current is ludicrous. The FSA’s stance is little short of tyrannical and is not justified by the evidence.

  8. believeitwheniseeit 18th November 2009 at 5:08 pm

    FAO Anonymous 4.42

    Open & Transparent is how the FSA describe themselves.If you do not believe me take a look at the FSA website.
    I have to agree-it is laughable,or at least it would be if it did not affect us all so seriously.

  9. I look forward to the FSA making the clear legal advice available to us all!
    Why do the FSA have to keep on threatening IFA’s all the time?
    There are some very knowledgable IFA’s in their 50’s and 60’s who are going to be lost to the profession (this is always bad in anyone’s world)!

  10. Sieg Heil F”SS”A – nice pair of Jack Boots Sheila Nicoll ! Walked over anyone recently or rather on anyone?

  11. Such a view from the FSA is no surprise. The FSA takes it s authority from the doctrine of Parliamentary Sovereignty, but that does not make its actions right. It did not make the actions right for those that claimed the same defence at the Nuremberg trials!

    However, The Human Rights Act gave the courts the power to declare that an Act unjustifiably infringed human rights even if it is covered by Parliamentary Sovereignty.

    At the time Lord Lester of Herne Hill QC and Monica Carss-Frisk were of the opinion that the FSMA 2000 was bad law and in breach of the Human Rights Act. Anthony Speaight QC took this view also and Peter Hamilton from the same chambers takes the view that the FSA is acting beyond its powers.

    Remember that Gordon Brown claimed that he had legal opinion to say the FSMA 2000 was compatible. Well when challenged he refused to release this! Now in the interests of clarity it would be nice to see the FSA’s legal opinion so that this issue can be put to bed one way or another. Thus I join the calls for the FSA to show it legal opinion!

  12. Is everyone at the FSA a director
    I wonder how many staff at the FSA will have the level 4 qualification by 2012.

  13. Were jackboots worn during this speech??

  14. Ms Nicholl’s reported comments seem to portray a typical attitude among financial advice regulators who have never provided financial advice themselves and choose to believe the people they are regulating are intrinsically unprofessional. Her type do immense harm to the reputation of the financial advice industry by opening their mouths and spouting their ignorance.

  15. What I find really ironic about this whole RDR and examination disucssion is how by enforcement, the FSA are casuing an outflow of advisors from the UK to the middle and far east where they are free from Jurisdiction to advise, recommend and implement, appalling and disgraceful UK pensions business through QROPS and there is absolutely nothing that the FSA either want to involve themselves with or do about it. The FSA holds a position to create and implement rules FOR CLIENT PROTECTION. Its a real pity that the regualtor cant regulate the appalling advice being given on products which hold an FSA endorsement/approval becaue these are the people that the FSA were created to protect. All thats happening is the UK is becoming more regulated, whilst the same advise can be given outside Jurisdiction, freely by so called ‘Proffessional Advisors”. Its a pity that the FSA doesnt demand the trustees and providers who are all shouting “we are compliant” to actually take more responsabilty over who they are accepting busienss from, in a similar way that they are making demands of the mortgage providers.

  16. I understand that in our buisness we have to progress and change but i know of no other industry that has such sweeping changes forcefully imposed at a time when most of our focus has been on keeping our buisnesses viable during a period of unprecedented difficulty .The cost alone of purchasing reading material and exam entry fees poses its own problems but the time required for study estimated at 100 hours per exam may be a step to far for many IFAs who provide an important service to their clients

  17. You must be joking 19th November 2009 at 7:55 am

    It isn’t necessarily what the FSA say that winds people up, but the tone in which that message is delivered.

    The FSA is supposed to be a regulator, not a dictatorship.

    On the subject of not being competent, I would like to ask what qualifications Ms Nicholl has, infact, I would like to ask what qualifications all key staff at the FSA have?

    The “credit crunch” has shown the FSA regulation of banks to have been incompetent, but have we seen a call for all FSA staff to qualify as banking analysts and/or economists before 2012 or seek alternative employment?

  18. Oh, how I long for the day when the Tories win the election & do away with the failed monstrosity that is the FSA.

    Their senior management must be quaking in their jack-boots trying to imagine where they will find highly paid alternative employment given that they probably do not have actual examination qualifications, although they are very experienced (sound familiar?)

  19. Philip Netherwood 19th November 2009 at 11:12 am

    Great, yet more threat and bluster about the qualifications with no ackowledgement of the issues with RDR. Firms with robust processes & supervision is what really matters – after all isn’t that why the banks got it so badly wrong? Time the FSA got their priorities straight post credit crunch – stop going for the easy targets!

  20. Yet again a civil servant loudly broadcasts unbalanced whispers and gossip. As others here have said, when do the good brokers get serious support from her? Why is Nicoll obsessed with portraying all brokers as baddies? What planet is her view derived from? She has two jobs to do, not just chasing baddies. She is there to support brokers generally, or else the consumer will very seriously lose out.

  21. When reports and stastics continuously reveal and proove that, complaints due to bad advice, are far more likely to happen if this advice was given by a bank based adviser (rather than an independent adviser) I struggle to unterstand why the FSA have an obssession with the IFA Market. Surely they would be more justified in focusing their efforts in trying to raise the standards and work ethics of the banks, their advisers, managers, directors etc up towards something close to the IFA Market already has in place. The cost of regulation may fall if the complaints reduce and the economy would not be in such a mess if the banks had the same high principles when dealing with their ‘clients’

    I am an adviser (with 17 years experience, working for a small IFA Practice) who is being made redundant due to the increasing costs of regulation/advice and reducing revenues due to squeezed commissions.

    I am now faced with the choice of leaving the industry, getting re-employed as an IFA with the same issues for the new employer or to go self -employed (with huge costs of set up and ongoing running costs) I will have to fit the study for exams into my daily tasks, whilst still trying to see enough clients to produce enough income to cover the high costs of running an IFA practice and hopefully leave me with an income to support my wife and 2 children. Not too mention fitting in time in a day to spend with my wife and children.

    Many other people face redundancy due to the economy and the ‘greedy banks’- why are the IFA’s the FSA’s target?????

  22. So I’ll make it up!

    “We have heard”

    Frustrating stuff, I am losing the will to see their side of the argument. Day after day we see these statements being made by an army of senior people responsible for this, that or the other, none of them suggest any joined up thinking is part of the regulatory process.

    I give up. Back to the drawing board.

    If the above quotes have been presented to us in context.

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