The Financial Conduct Authority and the Prudential Regulation Authority will have the power to commission expensive past business reviews and bill the firm involved to recoup the cost.
The FSA admits these powers could push up costs for firms.
The FSA published a consultation paper last week on authorisation and supervision under the new regulatory structure. It includes proposed amendments to the way skilled persons reports are carried out.
Skilled persons reports, also known as section 166 reports, check for weaknesses or failings in a firm’s practices and cover areas such as compliance, fraud, products and capital adequacy.
Currently if the FSA wants a firm to carry out an s166 report it sends a notice to the firm and either nominates a third party to carry out the work or asks the firm to nominate a company. The firm then contracts the work directly from the skilled person.
The proposed text of the Financial Services Bill allows the regulator to appoint a skilled person and contract directly with them.
The FSA is proposing to amend its rules to reflect this new power, and plans to create a new rule which will allow it to recover the costs of carrying out the skilled person report from the firm involved.
The FSA admits contracting with skilled persons directly could see costs increase for firms, as the latter could be subject to additional VAT costs, and reports could take longer to deliver.
Essential IFA managing director Peter Herd says: “If costs are going to increase as a result of these new powers, you have to question whether regulatory fees are going to reduce as a result. Or is this just a new way to tax us even more?”
Facts & Figures Financial Planners managing director Simon Webster says: “The fact the regulator is taking on yet more powers for no obvious benefit must make everyone a little uneasy.”