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Is the FCA tough enough on those behind failed firms?

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

Is the FCA up to the job? It is a question I am sure many advisers find themselves asking, perhaps no more so than around the time the FCA fees bills start coming in.

The regulator’s core objectives are all about effective supervision of the financial services market, and protecting consumers. One issue that goes to the heart of the FCA’s remit is phoenixing firms – firms that go to the Financial Services Compensation Scheme to die, only to rise from the ashes in an all too similar guise.

It is a problem that is close to advisers’ hearts. No-one wants to stand by while someone who should have known better dumps their liabilities on the FSCS then resurfaces somewhere else. There are also any number of whistleblowers who have tried to alert the FCA to the rogues in their midst, particularly when they have come across those same individuals in a past life.

Part of the regulator’s job is to rid financial services of wrongdoers. Where there is proven misconduct, bans are pretty final, save for those who are banned from holding senior positions but still able to work in the industry.

Where the FCA seems to run into trouble is assessing how much blame should be attributed to individuals when advice firms fail.

At one end of the spectrum, there will be directors who were clearly the instigators of poor business models and dodgy sales practices. But what about those who claim they were caught up in someone else’s wrongdoing? Where does the buck stop? How does the FCA determine who should continue working in financial services, and who should be subject to the regulator’s equivalent of a restraining order?

Those on the inside, including an ex-regulator, are adamant the regulator needs to do better at weeding out the bad guys on a permanent basis. It should not be beyond the wit of the regulator to introduce some sort of flagging system for those found to have done wrong looking to get reauthorised. Better yet, why not have a system that assesses outstanding claims with the FSCS, to see if there are individuals responsible that should be shouldering the cost instead of other advisers.

I know of only one case where a fine for unsuitable advice was diverted straight to the FSCS. Doing this more often would certainly be a good stepping stone to making the polluter pay, and discouraging rogues from re-entering the advice market through the back door.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 7th July 2016 at 9:28 am

    This is a problem that’s been going for years and the failure of the FSA/FCA to get any sort of proper grip on it is an absolute disgrace. Not only are we forced to fund the FCA’s very existence but we also have to pick up the tab time after time for its never ending litany of failures whilst the practice of phoenixing continues (mostly) unabated. If only the TSC had the powers it needs to be able to administer a robust boot up the FCA’s backside and direct it to get its house in order, with tangible penalties ~ against individuals ~ should it fail to do so.

  2. Natalie you ask the wrong question! In are the FCA tough enough ?

    Yes they are, but they constantly kick and suffocate the life and soul out of the wrong people !

    I think it was Frederick Douglass that said, no man can put a chain around the ankle of fellow man without finding the other end around their own neck !

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