The Financial Services Practitioner Panel has warned the FSA that some of its comments on the retail distribution review risk undermining market confidence and prejudging the outcome.
In its annual report for 2006/07, the panel says some of the initial comments made by the FSA about the review were not backed up by hard facts and could affect the industry negatively.
The panel says it broadly agrees with the FSA’s view that there might be flaws in the distribution system but expresses concern over the momentum building up behind the review.
It warns the FSA not to disrupt the distribution system without first being able to propose a viable alternative.
The panel says it supports the FSA’s move to principle-based regulation and the industry has a mutual interest and responsibility to help achieve this goal. But it urges the FSA to consider carefully the impact that its large number of reviews, projects and thematic initiatives are having on retail firms, especially when firms are trying to get to grips with the move to principles and major EU legislation.
It also expresses concern that the role of enforcement in the move to principles might be used to set precedents and unfairly single out firms to establish industry markers.
It welcomes the FSA’s recent statement that it is to re-examine the role of caveat emptor and the debate around consumer responsibility within the context of the move to more principles.
Panel chairman Roy Leighton says: “The financial services industry and FSA are experiencing a period of accelerated change. Together, we all therefore need to be ready and willing to respond promptly to the challenges that lay ahead.”