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FSA ‘happy’ with plans to divert fine money to Govt coffers

The FSA says it is happy the Government intends to divert the proceeds from enforcement fines to the taxpayer and away from reducing industry fees.

Chancellor George Osborne has announced plans to ensure the proceeds from enforcement fines go to the public purse and not the financial services industry.

The rules would apply to fines levied since April, including the £59.5m fine handed down to Barclays for manipulating the Libor rate.

The £38.6m levied in 2012/13 on the fee block affecting most advisers would have been 21.7 per cent higher without fines from the previous year being redistributed.

At a press conference in London yesterday following the FSA’s annual public meeting, Money Marketing asked FSA chairman Adair Turner whether he is comfortable for the industry to pay more under the proposals.

Turner said: “It is clearly for the Government to set the framework for what happens to enforcement fines. It is true to say we had previously suggested to the Government there might be a possibility for alternative uses of fines, for instance we have suggested one might consider funding things like consumer education out of the fine revenue rather than returning it back to the industry. So we are perfectly happy the Government is now looking at those ideas.”

When Money Marketing asked for assurances that smaller firms would be ringfenced from increasing costs, Turner refused. However, he said fees for the largest banks and insurers had increased in recent years while fees for the smallest firms have been frozen for three years.

He said: “When we looked at it we realised that as a proportion of revenue, our fees for small firms were previously much larger as a percentage than our fees for the very largest firms, and we have significantly rebalanced that.”

Turner added that Financial Services Compensation Scheme levies are “precisely determined by certain metrics of revenue or assets, so those are already fully proportionate to the size of the firm.”

Cambourne Financial Planning director Mark Loydall says: “The cost of regulation keeps going up and this is just another hit IFAs do not need.”


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There are 17 comments at the moment, we would love to hear your opinion too.

  1. I suppose this could be a fair outcome – as long as the huge cost of the FSA’s investigations are deducted before the fine is paid across.

  2. “we are perfectly happy the Government is now looking at those ideas.”

    Not quite the same as your headline…

  3. Derek Bradley ceo 4th July 2012 at 10:37 am

    On reading this I am minded to recall the wise words of Mandy Rice-Davies, probably best remembered for her famous quote at the trial of Stephen Ward.

    On being told that Lord Astor claimed that her allegations concerning himself and his house parties at ‘Cliveden’ were untrue she responded: “He would, wouldn’t he”?

  4. fees for small firms frozen??? Mine certainly have not been frozen. These guys live in a parallel universe totally divorced from those they regulate. Bring back FIMBRA and some common sense to regulation.

  5. Easy really.

    FSA/PRA/FCA are funded by the Govt. NOT THE INDUSTRY, they are answerable directly to the TSC and fines go to the Govt.

    Keep your nose clean you wont get fined and your cost of regulation will reduce and every taxpayer in the country will pay for them.

  6. so, we have to pay for the FSA’s inflated salaries and overheads, plus the mickey mouse advice service and now the other revenue source they did have is going elsewhere, which obviously means only one thing – we pay yet more, having just been hit with an 11% rise this year. Marvellous. I don’t hear much from our trade bodies lobbying against these things.

  7. Exasperated Me 4th July 2012 at 10:42 am

    At last we have evidence that the regulator is not independent.

  8. Turner and the FSA may be happy, but I’m not. David Ingram makes a good point that the costs of investigations need to be taken from the eventual fines, but after that they should be directed toward the costs of financial education, such as MAS. This would provide a direct cost saving to firms that have seen their fees increase year on year – frozen for three years? He’s having a laugh.

  9. Since it seems highly likely that Barclays were not acting in isolation in fixing the LIBOR rate there ought to be some more hefty fines around the corner. The amount could easily be huge and a significant opportunity for the Treasury to get their hands in our till.

    It already seems like a fait accompli and we have no vote in it. We just have to pick up the tab at whatever size they determine it should be.

    It must be right that the fine includes a fee to remain in the FSA to pay for the cost of the investigation and a bit of a windfall otherwise the good guys will get squeezed & squeezed to pay for the bad guys until there are no good guys left with any cash.

  10. @ Derek Bradley, actually she said ” He would say that wouldn’t he?.
    For those who are wondering what was meant I think it is roughly:
    “Naturally we are all delighted that instead of being set against the fees paid to the FSA the finmes should fall inot the maw of greedy grasping incompetent politicians who are desparate for every last penny they can lay their greasy sweaty palms on to cover up their own utter and complete incompetence at running the country”

  11. Funny how they can make retro-spective rules on transferring monies to the Treasury but not find any rule or make a retro-spective one that will catch ‘crooked’ bankers who manipulated LIBOR rates!

    Perhaps Hector & Adair can have their bonuses re-directed as well (they haven’t earnt them) see if they will be ‘Happy’ then? I would if it happened.

  12. John Profumo – you are classic – I am still laughing my head off,
    I was out with Christine Keiller last night and she said she did not have any respect for diplomats either!

  13. I was recently contacted by a member of the FSAs staff in relation to a complaint I sent in on behalf of a client about a Zombie Life Offices penalties being imposed on a proposed personal pension transfer of up to 25% of fund on transfer. The fund is a unit linked fund not a with profits fund.

    The member of staff did not know the difference and stated that an MVR would have been part of the contract terms. When I clarified the issue between unit linked and with profits funds, she said “I didn’t know there was any diffrence”

    The place is populated by the most perfect Numpties one could ever hope to have assembled in any one place.

    These inadequate, poorly qualified and in some cases downright thickos are ruining our industry with their incompetence and lack of foresight or common sense.

  14. Ned, the person you spoke to was probably a member of the contact centre and therefore is not required to be qualified to level 4, they probably have to deal with insulting people like you calling them numpties all day and do not deserve it.

    I very much doubt the person you spoke to on the phone is running our industry.

  15. What has the regulator been doing during the last five years with regard to all the recent revelations, banks fibbing about their cost of borrowing, etc?. Making sure the small IFA get their house in order seems irrelevant. Must dash as I have to complete my studies for the exams required to carry on in my business. Shame the people responsible for these illegal acts aren’t made to acquire further qualifications, so they can continue to plunder vast bonuses for failing. May I suggest that they study the ETHICS contents of the coursework, in particular.

  16. This is a big issue and we would do well to oppose this as far as possible.

    This represents a tax on the industry and must be squashed.

    Is this the thin end of the wedge? We already fund the MAS, the FSCS, the FOS, the FSA. Our profits already subsidise taxes, our NI contributions subsidise all sorts.

  17. Gillian Cardy 5th July 2012 at 8:54 am

    The Chancellor is NOT “looking at it” – he is proposing tabling an amendment to the Financial Services Bill which is very nearly at the end of its parliamentary journey …
    And I do not accept it is “for the Government to set the framework” – the FSA has statutory objectives … and if enforcement and what happens to the fines are part of how it enforces against bad firms (and rewards good ones – heaven knows this is the only regulatory dividend you guys get!!) then the FSA DOES have something to say about setting the framework.
    IFA Centre is working on a strategy – join us and join the campaign!!

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