The FSA has admitted that it will not improve its record on identifying risk unless it forges closer contacts with the industry and users of the fund management sector.
Speaking at the FSA's unit trusts and Oeics conference this week, asset management sector leader Dan Waters said he is “very clear” that the regulator needs to do more to spot potential issues before they become problems.
He said “having ears to the ground” on new business models, investment strategies, trends and threats to profitability will boost its chances of nipping problems in the bud.
Revealing that he is already in regular contact with the relevant trade bodies and key figures in fund management, Waters said the industry feels that the FSA does not understand its business as well as its predecessors. He said that impression was inevitable, given the scope of the FSA's role and the fact that the insurance sector has been under intense scrutiny during the first years of the regulator's life.
To help combat this, Waters revealed that the FSA is committed to a “step-change” in its training and development of staff on sectoral issues. He said it had already begun its new programme of inviting industry experts to give talks to FSA staff on fund management issues, which would also be detailed in a new core curriculum.
However, Waters also said that the regulator still sees too many financial ads where the firm had inadequately explained how a product works or what the risks are. He said they “are not fulfilling their part of the bargain” by saying the relevant material is somewhere within a brochure and not telling any actual untruths.
He said: “I am very clear that we will not get better at risk identification unless we are in closer contact with the industry and interested users of the sector. Having ears to the ground makes it much more likely that the FSA will spot potential regulatory issues before they crystallise into problems.”