In its annual report for 2007/08, published last week, the panel warns that many small firms view the RDR with “apprehension and uncertainty”, which has a destabilising effect.
The panel calls for the FSA to offer better support for smaller firms on principle-based regulation. It says: “One of the biggest challenges facing smaller firms is that they operate in highly competitive marketplaces with tight margins. The available time to absorb what is perceived to be a complex regulatory approach is very limited.
“Many smaller firms, without internal compliance departments, have no option but to incur high consultancy costs. Even then, firms may still not have certainty that they are compliant until their businesses are reviewed by the FSA.”
The panel voices concerns over the mortgage intermediary market, saying the FSA must take “swift supervisory and enforcement action to improve standards”.
Panel chairman Mark Rothery says: “Many smaller firms still feel overwhelmed by the demands and uncertainties over the FSA’s move to a prin-ciple-based approach, the application of the TCF initiative and the potential impact of the RDR.
Paladin Financial Services managing director Tim Purdon says he would like to see more guidance for small firms.
He says: “It is often difficult to identify which information is relevant to us. The problem with TCF and principle-based regulation is it is open to inter-pretation and we are receiving information from different sources that make it seem more onerous than it actually is. I think the FSA needs to clarify that information.”