This is symptomatic of the “I’m all right Jack” attitude that permeates much of society. Is it right or wrong to pick up discarded litter? Is it proper to speak out about issues where the creep of law or gratuitous regulation seeks to restrict personal freedoms?
Imagine we are sitting in our time machine, having been banished back to 1986 and given the opportunity to redesign the Financial Services Act 1986, the legislation that kickstarted the regulation frenzy in April 1988.
A swift glance at that section of the FSA site where they publish historic speeches will confirm a recurring mantra of “fairness and proportionality”. Yet the truth is that current regulation is unfair and disproportionate.
The revised Financial Services Act 1986 would segment the regulation process into two bodies – not dissimilar to Fimbra and Lautro. The matters of adviser supervision and provider regulation are not comparable and let us not forget that providers have an obligation to maximise profits, which means sell more product, whereas advisers have an obligation to deliver advice.
The original theme that consumers should not be made fools of but should be allowed to make fools of themselves should be fundamental to the revised act, particularly with regard to dispute resolution rules.
The act would also ensure that the advisers’ rulebook reflects the reality of consumer interaction, that not every client or every instance requires a detailed fact find, that holistic advice is for some and not all.
Adviser Alliance was outraged when the Financial Services Compensation Scheme emergency levy landed on the adviser sector. Like other advisers, we had considered Keydata to be a product provider, we felt the reason for this confusion rested at the door of the FSA which authorised Keydata as advisers and not as product providers.
We are aware of the legal challenge and, as individual advisers who have been hit with this levy, we would jump at the opportunity to fend off future impositions.
But where we disagree with Regulatory Legal’s push for a judicial review is that any legal challenge has to meet certain criteria. First, it must have a worthwhile chance of success. Second, it must be affordable. Third, the target must be appropriate.
We believe that a judicial review has scant chance of success due to the narrow parameters within which these actions are assessed. It does not look at the unfairness of a situation, it does not consider if there is any logic within the FSCS apportionment of costs. It will merely assess if the rules have been followed, regardless of whether they are flawed.
The loser may be saddled with the cost of the process and, given the FSCS can raise funds via the levy system to fight such an action, this could result in a substantial outlay for participating advisers.
The FSCS defence will rest, very simply, on the fact it followed rules as laid down by the FSA in its handbook. As such, ignoring the common-sense aspects, the FSCS appears to have a valid defence for its decision and we believe any judicial review is doomed to failure. We also note that, subsequent to our announcement, Aifa has reached the same conclusion.
Alan Lakey is partner at Highclere Financial Services and director of Adviser Alliance