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FSA to prevent firms from paying employees’ fines

The FSA has proposed new rules to prevent firms paying financial penalties imposed on present or former employees.

In its latest consultation paper, Decision Procedure and Penalties manual and Enforcement Guide review 2010, the regulator proposes a raft of changes including new rules to prevent any authorised firm, except a sole trader, paying a financial penalty imposed on a present or former employee, partner or director of the firm or an affiliated company.

The consultation paper says: “We do not know how frequently firms may have paid financial penalties imposed on their employees in the past, but concerns have been expressed to us about this practice. Such action could be in breach of Principles 1 and 11 of our Principles for Businesses, but we consider the introduction of such a rule would address a potential regulatory failure.”

The FSA is also making changes to its policy for publishing decision notices. A decision notice is usually issued after a person makes representations to the FSA on the back of a warning notice. The decision notice states what reasons for the action and informs that person that they have 28 days to make a referral to the upper tribunal. A final notice is issued if the matter is not referred.

New proposals would see the regulator only publish a decision notice if a person decides to refer the matter to the Tribunal, unless there is a compelling reason to do otherwise, such as early publication being essential to allow consumers to avoid any potential harm arising from the firm’s actions. If the person does not refer, the FSA will only publish a final notice.

Other proposals include extending the settlement discount scheme to the length of time a firm is suspended for. Currently a firm receives a 30 per cent financial discount for settling at the earliest stage. This would mean that a firm that has been suspended for 10 months but settles at the earliest stage would see that suspension reduced to seven.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Rather than talk fines, why not make employees financially responsible for their own advice in the same was most IFAs are.

    That would slow down the mis-sales at the banks.

  2. You wouldn’t think the FSA was having problems with retention and recruitment of staff would you?

    Mind you, the problems could be the cause of this activity, dreaming up press announcements in order to look busy!!

  3. Here we go again. Comments like that will decimate this industry and without us, their’s no FSA, No compensation scheme funding and sod all else.
    If a business firm is fined when an employee dies as a result of an accident, does the foreman, supervisor, departmental head etc get fined. No of course not. It is collective responsibility. Otherwise advisers might as well be self employed and distance themselves from platforms, banks, Building societies and partnerships. but there again the Inland revenue does not allow such workings when it is clear that the person works solely for one business.
    If this is going to be the case then advisors should receive 100% of the commission or fees charged and the Financial ombusman needs shooting.

  4. Steve @ IFAbonus 15th October 2010 at 4:30 pm

    The FSA are busy – empire building, and looking for crises they should have seen coming which they can discover after the event and then issue PR intimating that THEY solved the problem!
    Their PR machine has most MPs fooled sadly

  5. Employers should pay the fines imposed on employee’s.

    Employee’s are subject to Master & Servant Law and act in accordance with the direction of their employers officers (Their Masters).

    If they act ultra Vires of authority, it is a failure of the employer to introduce robust regulaion of the business.

    The FSA is a really sinister organisation.

  6. The statement “We do not know how frequently firms may have paid financial penalties imposed on their employees in the past” rather strongly suggests there to be no evidence ~ or at least that the FSA has made no effort to find any ~ and thus no justification to support this proposal. Will it be subject to consultation, however sham, prior to enactment or is it just something which the FSA has decided to impose on a whim, regardless of what anyone else might think?

    I have no problem with the principle of holding employees personally responsible for actions which may lead to the imposition of a fine, though I don’t see what business it is of the FSA to dictate the terms of employers’ relationships with their employees or consultants. It’s a step along from dictating that non-equity partners are as jointly and severally liable as full equity partners, on which point legal precedent exists confirming that they aren’t. An employee might well have reasonable grounds for challenging in a court of law any efforts to enforce such a rule, particularly if they could produce evidence to the effect that what they sold was what they were directed to sell by their sales manager. This, as we know, is common practice amongst the banks, who are forever driving their employees to sell this month’s favoured product on which the best commission deal has been struck with the provider, irrespective of actual suitability for each individual client. Barclays and that Aviva Global Balanced Managed fund springs readily to mind. So what will the banks have to say about it?

    Before too long, the FSA will be seeking to impose its own templates for all contracts of engagement between employers and employees. Intrusive and interventionist regulation is one thing and hard to argue with if it results in more genuine wrong doers being brought to book, but at this rate the industry will become the equivalent of a police state, with a regulator that seeks to remove all semblance of commercial discretion.

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