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FSA fines lead to fall in costs for advisers

The FSA has announced its costs for 2011/12 will go up 10 per cent, from £454.7m to £500.5m, but costs paid by firms will fall as a result of fines levied during the last year.

The net minimum fee paid by 43 per cent of the FSA’s authorised firms, including many IFAs, will fall by 9.4 per cent from £925 to £844.

The fee-block for advisers not holding client money decreases 2 per cent from £40.6m to £39.7m, although the fee block for those handling client money increased 88 per cent, from £26.4m to £49.7m.

The regulator says any increase in costs will be borne by larger firms, reflecting the regulator’s more intensive supervision of “high impact firms”.

Enforcement fines levied by the FSA during the last year mean that in total firms will pay 2 per cent less than last year.

In the first nine months of 2010/11 the regulator collected a total of £79.1m compared to £33m in 2010.

The FSA also announced a 32 per cent increase in funding for the Consumer Financial Education Body, from £32.9m to £43.7m. Out of this total the adviser share has increased 33 per cent from £3.2m to £4.3m.

FSA chief executive Hector Sants says: “The completion of the FSA’s changes to move to a more intensive approach to financial services regulation has inevitably led to some increase in the authority’s cost base. However, we are very mindful of minimising the additional cost to firms and are pleased that net of enforcement fines, the actual amount we will be billing firms will be falling by 2%.

“Longer term, the implementation of new UK and EU policies, along with the cost of managing the transition to two new authorities will continue to put upward pressure on our cost base. However, in general, we would expect these increases to be borne by larger and more complex groups and would hope to minimise the impact on smaller firms.”

The FSA said in December that it would be carrying out less supervision of lower risk, smaller firms as it moves to the new regulatory structure.

Aifa policy director Andrew Strange says: “Although we welcome a reduced fee for the majority of IFAs, we must ensure there are better checks and balances in place under the new regulatory structure to prevent ever spiralling costs of regulation.  
 
“We are pleased to see FSA again acknowledge a risk-based cost allocation approach. This must be extended to ensure that the IFA profession does not bear the cost of regulatory change introduced to tackle systemic risks posed by large institutions. In addition those IFA firms meeting the new regulatory requirements need less compliance and should therefore be rewarded through regulatory dividends.
 
“However, those IFA firms that hold client money will see an unjustified increase in their fees under the proposed structure. Despite holding client money this IFA model remains fundamentally low risk and should not be subject to such an increase in fees.”  

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. Incompetent Regulators Awards Team 1st February 2011 at 1:09 pm

    If they increase fines enough they can drop all fees!

  2. What about the fee blocks? 1st February 2011 at 2:04 pm

    Bank fines only reduce FSA fees for banks so I’m not convinced that IFAs will benefit at all!

  3. The costs of £500.5m is for the most expensive pantomime going, but without the laughs.

  4. Yeh I just got fined the other day

    It was called a levy !!!

  5. FSA fined a company local to me for Integrity mis selling but did not enforce the fine for over a year and in that time the company wound itself up and moved the client assets away. In the end we will all be fined, as the clients affected will claim through the FSCS, so much for justice and the regulator.

  6. Slightly misleading headline there. The FSA costs are still rising and its the charges which are to come down. Given that there are far less companies around to pay these, I would be interested to know what the actual cost per advisor is sitting at. £500.5 million still seems a lot and if the cost for myself to regulate is more than say £20k, I will happily sit at home for this and save the industry some badly needed money. This may be preferable to the FSA, after all. It seems such very little value is placed on what I do anyway, perhaps this is another good and inventive way to protect the publics interests.

  7. £500 million!!! Has the FSA gone completely mad! What on earth are they doing with all of that? Are they planning to hire every out of work banker in the country?

  8. Half a billion pounds a year to fund a totally unaccountable quango with little but a litany of massive regulatory failures to its name, not to mention a never-ending string of pointless new initiatives to its name. What a sick joke. Yet these people actually believe they fill a useful function. When are we going to see any sort of Cost:Benefit Analysis on the FSA itself? When hell freezes over.

  9. Fascinating. After 25 years of regulation the level of fines rises continues to rise. Does this sound like a successful regulatory strategy? When does the Government intend to question an organisation that’s only success has been to raise fines?
    And a budget of £500m – to deal with a client detriment of £500m (their figures)? When does the Government intend to question to question the cost effectiveness of the FSA? When it’s finished tinkering with the army, navy, air force, doctors, teachers etc etc. because they are directly paid by the Government and the FSA are not – so the FSA are effectively off the radar.
    Corruption is not only about taking money – it also includes conveniently looking the other way and promoting failures into better jobs. Sants above!

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