The FSA has watered down proposals to increase governance requirements for with-profits funds after receiving a mixed reaction from the industry.
Under the regulator’s original proposals, a with-profits committee would have been required for all with-profits funds except small funds.
However, the FSA’s policy statement on protecting with-profits policyholders, published last week, says it dropped the plans after receiving a mixed response from the industry.
The FSA says: “Given the variety of views expressed, we are not sufficiently persuaded to go ahead with our proposal in the form in which we put it forward.
“We will retain existing provisions that mean firms need to consider whether a with-profits committee is appropriate for the particular fund or funds they manage, including with regard to the size, nature and complexity of the fund in question.
“Firms should note that, having seen all the various arrangements in action, we continue to believe it is best practice to have a with-profits committee, at least for complex funds.”
The regulator has also decided not to force with-profits funds to adopt fully independent committees.
It says: “If committees have an independent majority, possibly with a senior independent non-executive or external person chairing the committee, they can reasonably include internal appointments to link them more effectively to the business.”
Syndaxi Chartered Financial Planners managing director Robert Reid says: “This would have been very expensive to implement so the FSA has done the right thing.
“But it is important they continue to focus on governance because, in the past, with-profits providers have been guilty of using the funds as petty cash.”