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MPs say FCA objectives and accountability need rethink

Proposals for the Financial Conduct Authority to have a “plethora” of objectives risk confusion and should be reviewed, say the Treasury select committee.

The committee’s report into the Financial Services Bill warns the FCA’s accountability mechanisms need improving and suggests the new regulator should carry out reviews of the costs and benefits of regulation.

The bill, currently at the start of its way through the House of Lords, proposes giving the FCA the strategic objective of “ensuring that relevant markets function well” and three operational objectives of “securing an appropriate degree of consumer protection”, “promoting and enhancing the integrity of the UK financial system” and “to promote effective competition for the benefit of the consumer”.

The TSC report says: “The Government’s original aim when framing the FCA’s objectives, was simplicity and clarity. There is a risk that this will be lost in the plethora of strategic and operational objectives sitting alongside a number of duties and ’have regard’ requirements. Such a framework could cause confusion.”

The Government believes the FCA’s strategic objective will focus its regulatory culture and ensure it does not pursue any single operational objective to the detriment of a properly functioning market.

The report also renews the committee’s calls for measures to be put in place to improve the accountability of the FCA. The committee wants it to publish full minutes of its board meetings, to have a duty to provide information and carry out retrospective reviews requested by the committee and pre-appointment hearings of those put forward for the role of FCA chief executive by the Treasury.

The report says: “It is widely argued that accountability mechanisms for the FSA have been seriously defective. Our recommendations therefore require statutory force.”

The report comes before the bill is debated for the first time in the House of Lords on Monday.


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

  1. Derek Bradley ceo PanaceaIFA 8th June 2012 at 8:24 am

    “It is widely argued that accountability mechanisms for the FSA have been seriously defective. Our recommendations therefore require statutory force.”

    This is possibly the understatement of the year if not the decade.

  2. Giving the Bank of England independence from government control was obviously a mistake, but the government is to blame for appointing King and then reappointing him. King was increasing interest rates when they should have been coming down, and even now, when they should be going down they are kept on hold. We need to know that elected representatives have control over these important institutions. Even now the TSC recommendation that RDR should be postponed is still being ignored!

  3. MP’s talking about hackling the FCA with accountability is a bit like giving King Kong a sedative AFTER he’s trashed New York. Bit bleating late mate.
    Andrew Tyrie is I am sure, a very nice man, but completey effete. If his livelihood had depended upon the outcome of his TSC review last year, things might have been better. You know it was not going to be a decent scrap when the man commenced his letter of admonishment to Sants, ‘My DEAR Hector’ when sants took the, telling the TSC to effectively ‘take a hike’.

  4. Julian Stevens 8th June 2012 at 10:04 am

    Firstly, Parliament needs to set up an Independent Regulatory Oversight Committee which, in addition to having the power to request retrospective reviews of the Financial Conduct Authority’s work, should also have the unassailable authority to impose amendments on or even to veto totally any proposed new regulatory initiatives.

    Should those likely to be affected by any such regulatory proposals consider them to be unreasonable, unjust, inadequately thought through, not properly consulted on or not based on a valid Cost:Benefit Analysis (as in likely to cost far more than the benefits they might achieve, of which there can be few better examples than the MAS or the FSA’s stipulations over commission in respect of top-ups to legacy products), they should have the legal right to present their case to the Committee.

    Other prime examples are the FSA’s approach to the ArchCru and KeyData debacles, both of them provider (not intermediary) failures that the FSA should have averted. Why didn’t the FSA take action on the findings of its 2007 arrow visit to KeyData? For that, the FSA has never been called to account yet it has simply dumped at the door of the IFA community the costs of mopping up both messes. Protestations against this approach, not least on the part of AIFA, have just been ignored or brushed aside and there’s nothing that AIFA or any other body can do about it because it has no right of recourse to a third party Committee. Hence we need an Independent Regulatory Oversight Committee.

    The Committee would consider representations made by both parties in such cases and give the regulator either a green light, an amber light (as in amendments are required) or a red light (as in: These proposals are unreasonable and you, the FCA, aren’t going to do impose them).

    The FSA/FCA will hate and will probably fight tooth and nail against the inconvenience of having to submit its proposals to third party scrutiny. It will also hate the idea of those affected having the right to present in open forum their case against the imposition of any such proposals and having to publish for all to see and to debate all feedback submitted in response to its consultations, instead of keeping them securely locked away from prying eyes and simply pushing through its agenda with a claim to have “taken on board” feedback received.

    And yet, for all that, how could any “open and transparent regulator”, as the FSA claims on its website to be, reasonably argue against the creation of such a Committee or of it having powers such as those described above?

    Did not Hector Sants claim before the TSC in March 2011 to be “a big fan of accountability”? Did he not also throw down to Andrew Tyrie the challenge that if the TSC doesn’t like the FSA’s lack of accountability vested in it under the terms of the FSMA 2000, then the TSC would have to get the law changed accordingly?

    Well, Mr Sants, the TSC might just manage to get the law changed and we wish them every success in so doing. The days of the FSA’s unaccountable tyranny might just be numbered.

  5. Well said Julian. You don’t fancy applying for the Oversight committee chair do you?

    You would get my support.

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