View more on these topics

MM leader: The FSA’s unconvincing Arch cru arguments

Since the FSA published proposals to implement an Arch cru consumer redress scheme in April industry concern over its implications has grown steadily.

Advisers are not alone. FSA board minutes from April reveal worries over the impact of the £110m scheme and state a “convincing case” needs to be brought to the board.

Reading many of the responses to the FSA’s consultation paper it is difficult to conclude that a persuasive or overwhelming argument has been made by the regulator. Quite the opposite.

Evidence submitted by Aifa and others casts doubt on whether the requirements for such a redress scheme, the first of its kind, have been met. Worryingly, there is concern that data gathered on a small cross-section of firms which sold Arch cru has been misused by the regulator in an attempt to justify a scheme that requires “widespread or regular failure” to proceed.

The FSA’s headline figures suggested 795 firms may have sold Arch cru, with up to 20,000 investors affected. However, a statisticians report, published alongside the proposals, estimated only 321 of these firms sold Arch cru with 11,800 missales.

Aifa says the research also indicates a concentration of the majority of Arch cru missales among a small group of firms, despite the FSA denying this.

It appears this data exaggeration was driven by a desire to portray “widespread” misselling which does not stand up to scrutiny.

The FSA’s view that all Arch cru sales were high risk suggests a dangerous use of hindsight regulation which fails to take account of concerns about the quality of disclosure material and possible outcomes of ongoing legal action against those managing the range.

The regulator has so far failed to explain the rationale behind its voluntary £54m capped redress package, funded by Capita, HSBC and Bank of NY Mellon, and why it was agreed before a decision on the redress scheme consultation and with investor losses still uncertain.

There are also major concerns about the wider impact of this scheme on the IFA sector as a whole through extra FSCS costs and a hardening of the PI market.

The redress scheme proposals appear to be a rushed and heavy-handed response to political pressure, supported by shaky statistics, which threaten to destabilise the entire IFA sector. In other words, a convincing case has not been made.

Recommended

Financial Ltd profits fall as it makes £1.5m complaints provision

Financial Limited has posted a pre-tax profit of £165,000 for the year ending 31 March, down by 51 per cent from £341,000 in 2010/11, and set aside £1.5m for complaints. The IFA network’s complaints provision has risen by 170 per cent from £570,000 in 2010/11. The firm says it has increased adviser fees as a […]

2

OFT bans and fines payday lender over £500k

The Office of Fair Trading has fined a payday lender over £500,000 and revoked its credit licence for failing to carry out proper identity checks on loan applicants and breaching money laundering rules. Online payday lender MCO Capital has been fined £544,505 after fraudsters used the personal details of over 7,000 consumers to successfully apply […]

1

HMRC tells providers to increase drawdown rates for women

HM Revenue & Customs has told pension providers to offer women the same, higher maximum drawdown rate as men from 21 December. The announcement means providers will need to use male GAD rates to calculate the maximum pension a woman in drawdown can take each year. This follows a ruling by the European Court of […]

Stuart Gregory MM blog
1

Stuart Gregory: Can your clients survive a payment shock?

The question I get asked numerous times every week is: “When is the right time to review my mortgage?” It is never an easy discussion, but I welcome the opportunity to discuss with clients and prospects their personal circumstances. It’s also useful to gather their thoughts about their finances in general. With the Bank of […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Yes, this is a political gesture, policy handed down by HMT to the FSA for implementation. The RDR. MMR and all other initiatives have been politically motivated.

    The courts have often said that the injustices of the FSMA 2000 were clearly the result of the intention Parliament.

    Did Parliament know that the regulators was not going to be independent of government? Parliament is a bunch of MPs, yours and mine, is this what those MPs intended?

    The buck stops with your MPs so ask them.

  2. My study module on Regulation & Ethics describes the FSCS as “the UK’s statutory fund of last resort for the customers of firms authorised by the FSA”.

    I imagine that an appendix will shortly be arriving from the publisher, augmenting this description along the lines of “except when the regulator decides arbitrarily and unilaterally, without either industry consultation or reference to any outside party or body, to make it a fund of first resort”.

    For that, surely, is what has happened here, is it not?

  3. When considering an application for authorisation the FSA requires;

    “Honesty, integrity and reputation (the FSA must be satisfied that the individual will be open and honest in his dealings’

    The industry should receive reciprocal levels of behaviour from the unelected, unaccountable hordes that populate Canary Towers.

    How can the FSA possibly command even the vbarest vestiges of respect when it is all stick and no carrot?

    If I was a regulator I would be ashamed to admit it.

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com