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Outside forces continue to rock the FSA

The FSA’s use of mystery shopping has been thrown into doubt after the Information Commissioner ruled the regulator must name and shame advisers who performed badly in one of its mystery-shopping exercises.

The ruling is yet another example of the powerful effect outside organisations- most notably the Information Commissioner and the European Commission- are having and will continue to have on the workings of the FSA.

The FSA is appealing the IC’s mystery shopping ruling warning it could unfairly prejudice mystery-shopped firms by damaging their commercial interests on the basis of results that may not be a fair reflection of their business.

It also warns disclosure could increase unjustified claims against the firms involved, mean they do not receive equal treatment compared to the rest of the market and make advisers less willing to work with the FSA.

If the FSA is forced to release this information it throws into doubt the regulator’s continued use of mystery-shopping which it regularly relies on to assess the market.

The IC decision follows its high-profile “Lautro 12” ruling against the FSA and there appears to be a growing tension between the two organisations. The IC has ruled the FSA must disclose withheld information three times this year and ruled the regulator has breached the Freedom of Information Act on three further occasions in 2007.

In an attempt to address the worrying situation the FSA is to publish a discussion paper early next year on the benefits and risks of greater transparency.

In a speech last week at the FSA’s Treating Customers Fairly conference, managing director, retail markets Clive Briault said the recent IC clashes throw up important points of principle which it will fight for in the two current appeals.

He said the FSA does not agree with where the IC has drawn the line with its public interest arguments in the two cases but acknowledged that it is no surprise this line is being tested.

Elsewhere, the Chartered Insurance Institute has released its third position paper on the retail distribution review proposing advisers in the professional financial planning and general financial adviser categories have up to six years to gain a Diploma in Financial Planning.

The CII has not proposed PFP advisers need to obtain chartered status although it says such a move should be encouraged.

This is in part because the organisation does not see the GFA category as anything other than temporary and does not want to set the hurdle too high as to make PFP status seem unachievable to many advisers.

The CII is also proposing membership of a professional body becomes mandatory with such bodies given the power and responsibility of policing adviser behaviour including a “rigorously monitored code of ethics and conduct”.

CII financial services director Steve Jenkins told Money Marketing he was confident the CII would be able to find the resources to take on such an important role.

Finally, the FSA has sent out a strong warning to the industry that it is being too slow in implementing its TCF initiative and that tough action would be applied to those failing to meet the December 2008 deadline.

TCF director Sarah Wilson told delegates at last week’s TCF conference there would be significant regulatory consequences for firms failing to meet the deadline including enforcement action if necessary.

Any comments, please email paul.mcmillan@centaur.co.uk.

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