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IFAs must not take FSA authorisation decisions lying down

Alan Hughes

Money Marketing reported recently that the FSA’s Regulatory Decisions Committee told the FSA to reconsider its proposal to refuse authorisation to an ex-Park Row adviser. This did not completely surprise me.

Following obvious failures in recent years, the regulator is now looking carefully at all applications it receives. Nothing wrong with that but what is not acceptable is the unduly harsh approach it seems to be taking in many cases – refusing authorisation without good grounds and forcing applicants to spend considerable time and money challenging such decisions.

So are there lessons we can learn from this?

First, do not give up just because the FSA indicates it will refuse an application. Many people give up at this point and perhaps the FSA relies on its decision going unchallenged.

Second, make an objective assessment of the strong and weak points of your case. Challenging the wrong points can damage your credibility and reduce the chances of success. If you have made mistakes then hold your hands up to those – it does not necessarily mean you are not fit to be authorised.

Third, do not be afraid to go to the RDC if you have to and make that clear to the FSA. The RDC is part of the FSA but it has quasi-independent status.

Although the RDC is consulted before a warning notice is issued, that does not mean the warning notice will be rubber stamped by the RDC if you choose to make further representations or request a hearing. Indeed, requesting a hearing always warrants serious consideration. If an IFA is going before the RDC, then usually at least one member of the RDC attending will be an IFA, so they will understand what it means to be an IFA.

The human element should not be discounted. The RDC will find it difficult to take away an individual’s livelihood unless there are serious concerns about that person’s integrity and/or competence.

As far as competence is concerned, this can often be addressed by training and supervision at a new firm – this is where a sympathetic and supporting firm can be invaluable – and the RDC will listen to that argument.

The FSA is not always good at distinguishing between issues of integrity and competency and identifying cases where a complete refusal to authorise is fully justified. However, experience shows that if you challenge the FSA in the right case, the RDC is not afraid to disagree with the FSA.

Legal representation is not compulsory at the RDC but it can add real value by enabling an objective assessment of your case early on, identifying the key issues and providing an experienced judgment on how to fight a case and the likely outcome. If the FSA knows you are serious about a challenge, it can also make the RDC see sense sooner rather than later, avoiding a hearing altogether in some cases.

The more people that challenge the FSA, the greater chance it will listen in future – which will be of long-term benefit to all IFAs.

Alan Hughes is an associate at Foot Anstey Solicitors

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Comments

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

  1. Yes but this lawyer thinks IFAs actually have the protection of the law. The FSMA outlaws IFA’s and places them at the mercy of the FSA judge jury and executioner.

  2. Surely, the same is true of all advisers who may reach 2013 having not completely satisfied the FSA’s new qualifying status.

    Advisers who are now qualified to give advice, perhaps already at Diploma status and beyond, will be forced to stop trading because they have become ‘incompetent’ by virtue of the FSA’s new arbitrarily imposed regime.

    The FSA moves the goalposts and thousands of advisers lose their livelihoods and millions of people lose their advisers. And exactly what will be achieved in the end……..?

  3. Alan Hughes is entirely correct that IFAs should not give up when dealing with the FSA – but sadly not only in relation to the decisions FSA hands down on applications for authorization.

    FSA is often not very good at investigating supposed breaches of the rules, and is even less able objectively to report on them to the RDC.

    Too often the FSA gains a win, and another scalp, in its investigations but only because the IFA hasn’t the nerve to stand up for himself.

    IFAs must be prepared to defend themselves, and to do so robustly.

    The process of an investigation appears exceedingly intimidating, and it is designed to intimidate, as does the attitude of many FSA officers but as I have found so often when defending IFAs the officers don’t know the law, they don’t know the rules and sometimes don’t know their own processes as well as they think they do.

    And it is the process of an investigation where the FSA is weakest. If you attack that and do it hard and repeatedly they make concessions, and they are often found wanting. I have some brief case histories on my website http://www.fsalawyer.co.uk .

    Whilst it is part of the FSA, it is clear from its decisions that the RDC does exercise independence. IFAs must not only not be scared to take the FSA to the RDC they must be encouraged to do so.

    It isn’t easy and it isn’t cheap – but the alternative is to let the FSA officers steam roller you.

    Regulation is an essential part of a stable market but it has to be good regulation. Putting the FSA to the test rigorously will improve their performance and therefore improve regulation.

  4. When the FSA wrote to the sponsoring firms saying they were refusing to accept the proposed AR they also said that if the applicant went to the RDC and it found in favour of the FSA the register would show this forvere, a ‘BAN’ if you like, I considered that to be a form of blackmail.

    The FSA has lost the plot, will the next reincarnation be any diferent? I doubt that simply because the same people will simply be wearing a diferent badge.

    There is another way but the architects of the previous failed regulators are feathering their nests onec again by assisting the new government in designing a ‘new’ structure.

  5. Surely, this is an issue on which AIFA ought to be taking up arms on behalf of its members, even if some of the people concerned may not be paying their levies currently because they’re out of the industry.

    Once again the question arises ~ what does AIFA actually do and achieve for its membership apart from attempting to lobby the FSA with precious little to show for it?

  6. This is a fantastic opportunity for the those willing to up skill. In particular Bancassurance Advisors who will be funded to study and have all exam expenses paid.

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