In a report launched today, the committee says the FSA should scrutinise both the services provided and the professional independence of companies that offer local authorities “treasury management” advice.
Committee chair Phyllis Starkey says: “As it stands, the FSA is powerless to intervene in the circumstances that led to a great deal of public cash being put at risk by the collapse of the Icelandic banks. Under current rules cash deposits and professional advice relating to such monies remain an unregulated activity outside the FSA’s remit.”
“We are therefore now calling on the Government to make the simple legislative change necessary to allow the FSA to regulate the provision of such advice. I welcome the FSA’s commitment, if that change is made, to address the concerns which the Committee has raised about the activities of treasury management advisers, including about potential conflicts of interest.”
The committee also draws attention to the fact that treasury management firms seeking clients in the public sector routinely use the phrase “authorised and regulated by the FSA” on their letterheads and promotional literature.
Starkey adds: “As the FSA recognises, the reassurance such statements are designed to offer individuals means some local authority treasury management departments have no idea that the advice or information they seek for the management of their cash reserves is not regulated by the FSA.”