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FSA will hit the ground running

At the end of November, the FSA will finally get its full authority and the era of the single regulator will arrive. But the new regulator has already been busy, both in terms of preparation and in pursuing a number of projects that have arisen along the way.

Perhaps an indication of the ambitious attitude tow-ards regulation that the FSA is taking is the busy agenda it has already emb-arked upon. No fewer than 112 consultation papers have been issued since the body was coined the FSA in October 1997.

Aifa director general Paul Smee says: “The propensity of the regulator to consult is good. It is weary at times to respond to them all. Its willingness to add-ress the big issues has been good as well. However, it is becoming increasingly bur-eaucratic, which may continue as time goes on. There is a risk it will drown in its own paperwork.”

Rather than wait for its official mandate to begin and ensure a smooth transition from the 10 existing regulatory bodies to one, the FSA has taken the bit bet-ween its teeth in tackling issues it felt impossible to ignore until N2.

Former DTI civil servant and now LIA public affairs director John Ellis says: “Politically, it would be difficult to hold fire and not do anything. People want to see that it is doing something. There is the question of public credibility. Right from when it is created, you have to prove you can do the job.”

One of the topics the regulator has tackled and introduced significant change on is polarisation. At the req-uest of the Government, the FSA undertook a review of the regime and in what has become known as phase one, recommended to the Treasury that it remove from polarisation stakeholder pensions and direct marketed products such as fund supermarkets.

It is now in the midst of phase two, which has inv-olved commissioning a number of pieces of res-earch from such consultancies as ORC International, Cap Gemini Ernst & Young and Charles River Associates about various facets of polarisation.

The industry is still awaiting the next consultation paper on further changes to the distribution regime, expected before Christmas, but at a conference last week, the FSA gave a strong indication of the direction it is heading in.

Other reviews that the FSA has either completed or is currently working on include a look at its role in the Equitable Life debacle, the report on which is due to be handed to the Treasury at any time, and a review of with-profits which may be rolled into the work Ron Sandler is doing within his review of medium to long-term retail savings.

It has also been involved in a series of reviews that have occurred because of misselling practices in the past. It inherited the tail end of the pension review from the PIA, which sees the final phase completed next spring. Similar exercises have begun looking at sales of free-standing additional voluntary contribution products and mortgage endowments but neither of these is as wide-ranging as the pension review.

FSA spokesman Robin Gordon-Walker says: “We have been working on the basis of the statutory objectives we have not got yet but anticipating the path we are going to take. To leave these issues in limbo for years just would not have worked.”

Perhaps most indicative of the ambitious regulatory agenda is a move which began in late October 1999 when the Treasury ann-ounced its intention to regulate mortgage lenders.

This meant the FSA was left to sort much of the detail, a process it is still finishing at the moment. It issued consultation paper 98 about mortgage regulation and the deadline for responses to it passed in mid-September. Regulation in this area is due to take effect nine months from N2, at what is called N3.

Another area it has done a lot of work on is in consumer education, which will be one of its four main statutory objectives come N2. It has issued a series of product warnings, created a consumer website with information about products and advice and published a series of pamphlets providing basic information.

There is no sense in a last-minute scramble within the corridors of the FSA. According to sources, most of the preparation work has been completed. The regulator has been working to a hypothetical deadline of October 1, which was the rumoured date for N2 at one point, so it is just a matter of putting the finishing touches to the rulebook.

IFA Syndaxi Financial Planning principal Robert Reid says: “I&#39m very disappointed about what has been done with the rulebook. There has not been any attempt to codify it.”

One area that is still in its finishing stages is grandfathering, the term applied to authorised firms having their regulated status continue under the new regime. Firms have been encouraged to contact the FSA by the end of October to confirm their size, type of business and number of registered individuals, which determines the type and areas of business they will be allowed to participate in.

Scottish Equitable IFA training manager Peter Williams says: “The FSA has done a pretty good job to date. There was always some anxiety that, because the senior management did not come from the PIA or retail side, we would lose out. But it is fair to say this has not been the case.”


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