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FSA will name and shame IFAs on capital adequacy

The FSA has issued a stark warning to the industry that it should be prepared for the regulator to name and shame IFA firms which fall foul of its capital adequacy rules.

FSA director of investment firms David Kenmir said at Money Marketing Live in Manchester this week that the regulator does not feel that capital adequacy is being taken seriously by some IFAs.

He said it is important for the industry that these firms are reined in.

Regulations stipulate that IFAs must retain £10,000 of capital and have adequate PI cover. Kenmir said while it is understandable this is more difficult to achieve in the current PI crisis, it is an important measure.

He said that out of around 8,000 firms regulated, this could potentially be an issue for up to 800.

Monitoring capital adequacy has been an issue for the FSA since its inception but Kenmir says it is definitely more of an imperative at present.

His warning is not aimed solely at the smaller end of the market. When questioned whether this is a way for the FSA to get rid of smaller firms, he responded that many of the firms to be targeted are at the bigger end of the sector.

He also pointed to concerns over senior management, saying the industry may see big firms receiving disciplinary action over senior management failings.

Kenmir said: “Firms that are named as not having sufficient capital adequacy are not simply going to be closed down straight away but they will need to rectify the situation as soon as possible.”


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