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Pressure grows on Govt to abolish approved persons regime for advisers

The Government is facing growing calls to scrap the approved persons regime after the FSA’s former head of ethics branded the system “weak”.

In a TSC report into the Co-op Bank bid for Lloyds Banking Group branches, published last week, chair Andrew Tyrie said the Co-op failings show the crucial need to extend the new senior managers’ regime for banks to all regulated firms.

Experts have previously warned the move could take years and cost advisers millions in regulatory costs.

The FCA is introducing a new regime with greater individual responsibility for senior bank staff.

It is understood the Treasury has blocked the regulator from extending it to all regulated firms.

The report says the failings of former Co-op chair Paul Flowers in particular highlights the clear need for a new regime.

The report states: “While the approved persons regime will be abolished for the banking industry, it will be retained for many in the remainder of the financial services industry, including insurance and asset management. Given its manifest failings, this appears hard to justify. FCA director of supervision Clive Adamson appeared in oral evidence to agree with this view.

“The Government and the regulators should, at the earliest opportunity, make proposals to extend the coverage of the senior managers and certification regimes to, and remove the application of the approved persons regime from, other parts of the financial services industry.”

Ethics Foundation founder David Jackman, who was head of ethics at the FSA, says: “The approved persons regime is a weak regulatory tool and should be scrapped. The test bar is low because they are testing for negatives such as court judgments or lots of debt but most people don’t have those things. It is not a very detailed or testing standard.

“Therefore, the money and cost that goes into it is not really justified. There are a very low number of people barred from the industry – about 70 investigated and seven barred each year. It’s not a good cost benefit. 

“I would like to see ethics training introduced to address the integrity issue,” he adds.

Adviser view

Jason Witcombe, director, Evolve Financial Planning

I agree with the TSC. The larger the organisation, the less personal responsibility someone has. For senior executives, it feels reasonable they have their neck on the line in the same way IFAs who are directors of a business do. There is an issue with the amount of risk people take, collecting big bonuses and not having any meaningful responsibility. 


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