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Lawyers say FSA restructure will just be a costly rerun

This is going to be the same people requiring firms to follow broadly the same rules’.

Legal experts have warned that the Government’s new regulatory framework will create immense costs for the financial services industry and many of its perceived benefits are largely illusory.

CMS Cameron McKenna partner Simon Morris says the new regime is an unwelcome development for firms which will be saddled with extra costs at a time when they are strapped for cash.

He says: “If there are a whole new set of rules and procedures to observe, people will have to be paid to study them, systems may need to be altered, new compliance staff may need to be brought on to manage four relationships rather than one and there will be the cost of getting specialist advice.”

Morris warns of the risk of moving back to an “alphabet soup” regulatory framework under the new fragmented structure and says the voice of the UK financial services industry in Europe could be weakened.

He says: “The regulation of 20 years ago when you had SIB and five regulators under it bought us the Equitable Life debacle and everything fell between the stools. If there was some blindingly obvious advantage, as there was with the creation of a single FSA compared with the predecessor regulators, we could recognise that but I just do not see it. This regime is going to be more or less the same people requiring firms to follow broadly the same rules.”

Fishburns Solicitors partner Harriet Quiney says the new structure will create uncertainty for advisers and there could be big practical problems.
She says: “The FSA has had huge problems recruiting staff because of the lack of certainty. People are not going to want to join the CPA when they do not know its direction.”

Lansons Communications regulatory consulting practice director Mark Penton says the two-year timeframe for primary legislation is viable but the industry faces five years of uncertainty while it rebuilds the regulatory framework.

He says: “What is important is the relevant organisations and their stakeholders are clear on who does what and pieces do not fall between the gaps. It will be extremely resource-intensive and the cost will be very big at a time when money is tight.”

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Comments

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

  1. Illusory

    We deal in intangibles it’s all illusory.

  2. It’s all very well comments from the legal profession who self regulate and will have little or no idea as to how “unfit for purpose” the FSA has proved to be for the IFA market. If our business had the same type of oversight as the legal profession then perhaps we would not be mired in the regulated advice, regulated products mess that personal financial planning find itself in.
    I appreciate that there is a cost implication at a difficult time however there is no point in continuing with a regulator who, instead of stabilising confidence in the advice market, is the catalyst for the mis-trust and undermines the public perception of advisers daily.

  3. Someone is talking sense here.

    All we need to do is remove the rule that prevents the FSA from being legally accountable for its decisions and most of the problems with regulation will be resolved.

    Allow us to take action against the FSA where it is at fault and the care that it takes with regulation will increase.

  4. Steven Farrall (Adviser Alliance) 23rd June 2010 at 5:03 pm

    Lawyers don’t know the half it – well all of it really. Sod the ‘legal uncertainty’. It’s not bad law that’s the problem with FS reg-yew-lay-shun, it’s bad (as in catastrophic) economics.

    To recap, regulation was conceived under Thatcher as a way to ensure that newly privatised and liberated monopoly or quasi monopoly industries would be made to compete. Competition being the key prerequisite for an efficient market economy. In addition there were requirements for openess to address information imbalances. (Speaking as an IFA, correcting information imbalances is exactly what clients employ me to do.)

    From this it can be seen that the function of the FSA or whatever they end up being called this week must be limited to engendering open competition. That’s it. That’s all that’s required. And of course we already have the OFT to do that.

    Essentially then the FSA’s successor is already badly conceived if it is set up as a ‘consumer champion’. Since that assumes that freedom and markets are not consumer champions, which of course is arrant nonsense because it is exactly consumers that benefit from the fierce commercial competition that drives efficiency.

    Furthermore a key component of all the recent nonsenses was the epic expansion of moral hazard, that is people not taking responsibility for their own actions. The more that the citizen is nannied and infantilised by an aunty regulator the more he will abrogate his responsibilities.

    It seesm like the Coalition have as little idea of what works best as the preceding bunch of halfwits.

  5. Can someone out there explain what ‘Largely Illusory’ means?

    The term ‘LARGELY’ now appears even on the media with weather forecasters saying ‘Largely dry, or wet’.

    Even the author of this article appears unable to have a command of the Queens English.

    THE WORD IS MOSTLY, NOT LARGELY.

    Does ‘largely’ exist in the Oxford dictionary?

  6. How do you get a group of lawyers to smile for a picture?

    Just say “Fees!”

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