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Fsa crackdown threat to shut ifas which fail to treat customers fairly

The FSA will ban IFAs that fail to respond quickly to regulatory changes brought about by depolarisation.

The regulator has also pledged to investigate the role of its regulatory decisions committee.

In its annual business plan, the FSA has made clear that it will crack down on IFAs that do not uphold a high quality of advice. The FSA plan on the role of IFAs in the depolarised market says: “Our supervision will pay particular attention to the fair treatment of customers, especially the quality of advice and the handling of complaints. Where deficiencies cannot be corrected speedily by a firm, we will take action, which may include removing the firm’s authorisation to do business.”

The plan acknowledges that intermediaries will come under considerable pressure in the next 12 months but expects firms to respond constructively and speedily to any failings or deficiencies in their business model.

Following criticism from the financial services and markets tribunal during the Legal & General endowment misselling case, the regulatory decisions committee is set for a revamp, with a promise that the FSA will look to iden-tify improvements.

The FSA budget for 2005/06 is set to increase to 266.6m from the 250m forecast for 2004/05. Part of the rise is from an increase in mortgage and general insurance regulation costs from 32.7m to 38.6m, a slight increase in enforcement to 8m and a 14m increase in general costs such as staffing, rent and infrastructure to 212m. However, FSA fees will reduce for some firms because of penalties handed out in the current financial year which stand at 21.7m and could result in a 10 per cent drop in charges.

A key expense could be staff recruitment. It has recently lost director of enforcement David Severn to Aifa, head of enforcement law Loretta Minghella to the Financial Services Compensation Scheme and enforcement director Andrew Procter to Deutsche Bank.

Chief executive John Tiner says retaining and recruiting staff is a challenge.He says: “We are competing for talent in a tough recruitment market, not least against firms keen to hire quality people with FSA experience. Our remuneration packages must be competitive so that we can continue to recruit and retain the people we need.”


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