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MM Leader: Judicial review is a symbol of discontent

The High Court last week dismissed the challenge to the FSCS’s decision to levy the costs of Keydata claims on invest-ment intermediaries.

Many experts had predicted the result but it would be very unfair to dismiss the challenge from IFAs and Regulatory Legal as a waste of time.

It is sometimes worth taking a stand against the unfairness of the regulatory machine, even if the chances of success are remote. The FSA promised an FSCS funding review last year but this has been put on ice due to the upcoming regulatory shake-up.

FSCS fee block definitions and particularly the stress being put on advisers by the current rules should be a priority when the review even-tually takes place.
You would hope the judicial review challenge will be taken on board by policymakers as an important symbol of discontent with the current funding measures.

High court judge Mr Justice Beatson agreed with the FSCS that Keydata’s activities should be considered inter-mediation as Keydata purchased securities on behalf of the investor and exer-cised no discretion on bond purchases.

The judge dismissed the argument that Keydata should be classified as a provider as it effectively controlled the whole process, including the manufacture, marketing, literature and being the architect of other companies invol-ved. Debate must now turn to how the current unfairness can be addressed.

A case could be made for fund man-agement groups and pension providers taking on greater responsibility for claims relating to firms defined as intermediaries, given their reliance on advisers to generate so much of their profits.

The Keydata saga also points to a huge supervisory failing by the regulator. Questions must be raised as to whether one specific part of the industry should have to pay the price for issues caused primarily by failings at the regulator. Will the FSA’s move to intervene earlier in product devel-opment help stop a future Keydata from happening?

The thorny issue of ensuring advisers leaving the industry or IFA firms going bust do not leave behind significant liabilities for the rest of the industry to pick up must be addressed.

The FSCS will shortly be announcing this year’s funding requirements, which is likely to include a significant Lifemark levy. Bills will again begin to land at IFA offices around the country. Without significant reform, these big bills look like becoming an annual event.


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FSA guidance on risk offers advisers an important opportunity to mitigate failings and improve the client offering


FSA bans and fines IFAs £28,000 for Ucis failings

The FSA has fined and banned the two partners of investment firm Clark Rees LLP for failing to ensure the firm made suitable recommendations to its customers regarding unregulated collective investment schemes. Paul Clark was fined £10,500 and Ceri Rees was fined £17,500. They have been banned from performing senior roles and also from selling […]


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

  1. For me the FSA is an unjust and unfair organisation and the Keydata situation as this article indicates is clearly issues that need to be addressed but continue to be ignored by the FSA.

    In a society that is based on the “law of the land” and justice and fairness as this Government announced it would do in the Queens speech.

    How any regulator that fails time and time again cannot be held responsible for it’s own mistakes yet judges and sentences others on their staggers me.

    Even the Police and Givernment can be called to account and taken to court as we now know with the FSA it is virtually impossible to obtain justice as they are protected under FSMA 2000 for any wroing doing.

    We don’t allow the Police to be protected from the law when they do something wrong so why do we protect the FSA?

    The whole system of regulation is wrong and so so very costly yet no one seems to care or even bother to come up with alternative solutions.

    Everyone wants consumers to be protected but not at “any cost”


  2. Much now rests on the BBA’s current challenge to regulation by hindsight in respect of the sale of MPPI. With the best lawyers and barristers that money can buy, a victory might just put an end ~ finally ~ to this patently unfair and pernicious practice on the part of the FSA.

    Who’d have ever thought that the banks might turn out to be such an important ally for the hard-pressed IFA sector?

  3. This has become your prison, and theirs.

    As in all prisons the inmates sometimes attempt to escape, is it morally acceptable so see the innocent ones try to be free of persecution and fail? Is it fair to give them a good kicking because ‘we told you so’, hindsight is a wonderful thing but it is the preserve of the regulators so stop whining and make sure the next incarnation of the regulator is fair and reasonable right down to the bone.

    Who do you want to do that job this time around? The same old same old?

  4. @Evan

    Not sure if your comments are directed at me but if so then how do we get the next incarnation of the regulator to be fair and reasonable?

    We are all I hope trying to do just that by writing to our MP’s etc., but when the likes of Mr Hoban refuse to listen and Government appears powerless against the FSA as some MP’s (including Labour MP’s) are only now just discovering and have just announced a campaign to try to get the FSA to be more accountable to Government, you wonder if we have any say at all.

    So far it looks like CPMA etc, is just a continuation of the FSA as it was before with the same people in control and with Mr Sants now on the European regulators board it seems like little will change.

    If our elected MP’s and Government find themselves powerless against the FSA what hope is there for the change we all yearn for?
    Mark Garnier and Ms Harriett Baldwin seem to be doing their best to obtain answers on our behalf but one suspects they are being thrown numerous legislative balls of confusion, and rules and regulations just to throw them off course and delay getting answers.

    Why is product regulation not an option I wonder?

    If we continue as we are then we are just digging a deeper hole in my view.

  5. Did they finalise whether the lawyers who ran challenged the FSCS have paid their costs?

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