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Gill Cardy: IFAs may not be on the hook for everyone else’s failures

Cardy Gill IFACentre MM blog

How many people are familiar with the snappily titled “The Responsibilities of Providers and Distributors for the Fair Treatment of Customers”?

It’s a surprisingly readable nine page document buried at the end of the FCA Handbook, after Perimeter Guidance and before Unfair Contract Terms, both sections considerably more turgid.

Originally written in 2007, I was delighted to see that this document survived the transition from FSA to FCA.

Why am I so excited by this?

Because in this blissfully short guide to regulatory expectations, advisers and providers get some really straightforward explanations of what providers should deliver in terms of product design, information to customers, information and training for distributors, and post-sale responsibilities. We also see what distributors should deliver in terms of considering financial promotions, providing information to consumers and selecting providers.

It says: “This Guide is not intended to imply that a firm must take on the regulatory responsibilities of other firms in the distribution chain nor that there is a requirement for any firm to ‘police’ any other firm in the chain.”

Can this mean that all parties in the product design and distribution chain are entitled to rely on one another doing their jobs properly, in accordance with regulatory principles and rules?

Can this be what lies behind the assertions made by the regulator that that if a fund manager or life company has published facts on a certain product then advisers do not need to conduct further due diligence?

It makes sense really. The overarching regulatory principles of skill, care, due diligence, integrity, treating customers fairly, considering information needs of consumers, and the requirements for clear fair and not misleading communications, and effective systems and controls apply to each and every regulated firm.

But here’s the problem. For this system to work every firm should not just be subject to the rules. It must be held accountable to the rules.

Advisers know what accountability feels like. We are accountable to our clients from one side and the regulator from the other.

There is a clear path for clients to take if they feel that their adviser has not advised them well.

The regulator also has a clear path to tread when it feels that an adviser has not met its expectations.

But to whom is a product provider accountable?

GIf a client tries to complain to a provider the stock answer is that as an advised customer they should take the matter up with their adviser.

Advisers have no realistic ability to claim against providers who do not come up to the standards that the regulator has set out, here or elsewhere. Anyway, advisers are not customers, or eligible complainants at FOS or FSCS, and do not have to be treated fairly.

This leaves advisers totally dependent on the regulator holding providers to account when the provider fails live up to expectations.

The regulator “with teeth” should use them instead of removing its dentures when things get a bit tough, and then perhaps “the integrity of the UK financial system” really would be enhanced.

Gill Cardy is managing director of IFA Centre



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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Really good article from Gill and to be fair to Rory percival, this repeats what he has actually said, the problem is that the actions of FOS and also the FSA itself with regard Arch Cru and keydata are clearly at odds with thre rule book.

    I was at the PFS seminar in Maidstone on Wednesday and Adam Samual covered the bit on the transition from FSA to FCA and one of the questions was “What is the point of following the FCA rulebook (or what Rory says) when it is the FOS and FSCS which are the judge, jury and executioner usuing a different set of rules?” (or words to that effect).
    I didn’t advise on Arch Cru, but I believe the FSA backroom deal with Crapita etc was just that, a backroom deal. I would love to hear a personal opinion/statemnt from Rory Percival trying to balance the Arch cru back room deal with this document Gill has reminded me about (I forgot I’d read it. On eof the advantages of being DA is you read stuff non DA people don’t as you need to, but one of the disadvantages is you read so much waffle from the FSA, you forget where and when you read it!)

  2. Derek Bradley ceo Panacea Adviser 10th May 2013 at 9:46 am

    Gill says “it makes sense really” and that is the very reason this very well buried tome has not borne fruit.

    Common sense and regulation are pole opposites.

    Originally written in 2007, this is yet another document, along with the Regulators Code of 2007. I suspect that both exist to self serve and complement each other.

    Regulation today is based on rules that should be fairly applied but sadly almost always apply one way, akin to having a dual with swords only to find your opponent has bought a duelling pistol too, tucked in his belt behind his back, that he will pull out and fire when he realises all is lost.

    Perhaps this discovery, a very good one by Gill, will focus minds a little in Canary Wharf.

  3. The FCA like the FSA before them, will ignore this and continue to vilify the adviser community.
    This is the easiest route for them and makes the public think they are policing the industry.
    Ignore what Percival said. It will not be a defence you can use at FOS.

  4. Julian Stevens 10th May 2013 at 10:05 am

    So this “surprisingly readable” nine page document is buried somewhere between pages 9,000 and 10,000 of the regulator’s rule book, does it? Great, I can hardly wait to get to it.

    That aside, are we to infer that by dumping onto IFA’s responsibility for its own failings in respect of ArchCru, KeyData et al, the FSA has casually ignored this section of its own rule book?

    What’s the point of 10,000 pages of rules if the regulator has carte blanche, at its own discretion and without having to answer to any higher authority, to selectively bypass those that would almost certainly place the blame for the latest motorway pile-up on its own doorstep and, instead, inflict on the IFA sector yet another travesty of justice?

    An Independent Regulatory Oversight Committee would almost certainly say to the regulator: This is wrong and you aren’t going to do it. It’s your mess, you sort it out. And don’t even THINK about adding your costs to next year’s levy bill because no further increases are to be allowed for the coming five years and, after that, they’ll be capped in line with the CPI. All and any costs will have to be met by making economies elswhere in your budget. You could always make a start by moving three quarters of your staff to a vastly less extravagant location than Canary Wharf, followed by cutting out any further bonus payments. Oh yes, and whilst you’re at it, the Committee will expect a full report on exactly which of your staff allowed this to happen. Forget “collective failure”, from now on that simply won’t wash. Isn’t that the way proper accountability should work?

    And BTW, what’s APFA doing about it?

  5. Anthony Smtih 10th May 2013 at 2:46 pm

    The FSA reminded platforms of this document only last year when investigating UCIS and what action firms have taken or not taken in having these available on a platform as part of the distribution chain. Seems like they haven’t forgotten about it after all.

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