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Funding regulatory reform

Aifa director general Chris Cummings explains why he is calling for fundamental reform of FSA funding.

Those watching the recent FA Cup semi-finals will know what a terrible state the Wembley pitch is in. In the short term the pitch needs relaying but, longer term, there needs to be a complete review of the playing surface.

The same can be said for the way the FSA is funded. We have had regular consultations on fee levels but we need an overhaul of the entire system. That is why we commissioned an independent firm of financial experts, RGL Forensics, to review the funding formula.

The result lays open how the intermediary sector is being unfairly penalised by the regulator. RGL has recommended a fundamental overhaul of the way FSA costs are allocated. Just reallocating the indirect costs, based on the revenue of firms, and not reviewing the entire fee block system, would reduce the bill for intermediary firms immediately from £70m to around £25m. This could be implemented swiftly. Longer term we need a complete review of the entire system.

The IFA profession did not cause the banking crisis. It was not our actions that resulted in the widespread chaos in the markets and it is not the IFA sector that now requires more stringent regulatory supervision.

We believe the FSA should be appropriately funded for the work it must undertake to protect consumers but it should focus its attentions on
organisations that present greatest risk and reduce the regulatory burden on the IFA profession . All we are asking for is a level playing field.

We have presented these findings to the regulator and will be holding discussions in the coming weeks to try to deliver a more economically sound and fairer outcome.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Were I a betting man, I’d lay £1,000 on the FSA rejecting the report carte blanche, because ther FSA has its own agenda and anyone who disagrees can basically go jump off a cliff.

    How much did it cost to have done, Chris?

  2. Steven Farrall (Adviser Alliance) 21st April 2010 at 4:26 pm

    The whole system should be funded by an explicit product levy. As the regulators themselves are now proposing a Tobin tax on international financial transactions there is no excuse for not considering an equivalent Regulatory Added Tax (RAT) on all domestic financial transactions. This would have the added benefit of revealing to the end user – the public – the real cost of all this bureaucracy. If The Man on the Clapham Omnibus saw a RAT charge of £x applied to his bank account each month he’d soon want to know how well it was spent, or not. Levying the system’s fees in this way would be a salutory lesson for the FSA or whatever the next governemnt invents to replace it. Never forget that economies exist of just people and things; governments and companies are just convenient administrative fictions by which we better organise our lives. The people pay these regulatory taxes now, using a product levy would make the price signal entirely transparent.

  3. we could run a new national FSA lottery, cost a pound a go max prise 4 million and what you have to do is guess who they are going to fine next or what stupid level they are going to umpose

  4. The FSA should be funded by the taxpayer as it is consumers who are supposed to benefit from regulation. Are the government & fsa afraid that, seeing what a complete waste of 454 million and rising,all this bureacracy is, the taxpayer would call for them to be torn down? The only people who truly benefit are the fat cats at canary wharf.

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