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FSA reveals its regulation by risk regime

The FSA confirmed at this year&#39s PIMS conference that most IFA firms will be in the FSA&#39s lowest-risk category following N2, meaning they will require less attention.

After N2, the FSA will bring all IFAs under a new investment firms division and ranked A to D on a risk scale. Firms with a turnover of less than £1.25m or fewer than 20 RIs, which covers most IFAs, will be in the lowest-risk category D of around 7,900 firms. They will only receive regulatory attention if a problem arises.

Firms with more than 200 RIs or a turnover of more than £250m will go in to category A, needing the most attention. There are around 350 IFA firms in this category and these companies can expect a detailed risk assessment.

The FSA&#39s investment firms division covers around 8,900 firms including fund managers, securities, stockbrokers and IFAs.

The FSA says categorising firms is a way of distributing resources and not an indictment of firms. It plans to tackle problems as themes rather than visiting firms on a geographical basis.

FSA head of themes department John Liver says: “We had to come up with a risk structure that allows us to spend our resources in the best way. We will become more sophisticated in getting information from category D firms to make sure we only give them attention when it is needed. Category A firms will get more attention but it will be proactive to prevent problems occurring.”

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