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Severn slams FSA over consultation process for investment guidance

Former FSA head of retail policy David Severn has slammed the FSA’s suitability of investment advice guidance, saying it shows disregard for the consultation process.

The regulator published the guidance consultation paper on January 6 which warns about the weaknesses of risk-profiling tools. The consultation closes on January 28.

It cited a review of 366 files previously identified for suitability assessment failings. Over half of the files were deemed to be unsuitable because of a failure to match investment selection with the customer’s attitude to risk.

The FSA said the level of failure was “unacceptable”.

But Severn, who is also a former Aifa director general, criticises the regulator for setting a consultation period of only three weeks. He says: “Allowing three weeks for comment on a document where little was done to bring it to the attention of those affected shows a disregard for proper consultation.”

Severn also argues that expecting firms to take action based on findings from only 366 files is disproportionate.

He says: “The FSA is supposed to take a risk-based approach to supervision. Taking a blunderbuss to all firms does not seem the correct approach.”

Personal Finance Society chief executive Fay Goddard says: “It is called a consultation paper but it looks like a fait accompli. There are no consultation questions and the regulator has given respondents three weeks to send in comments.”

Goddard says it is worrying that the guidance paper holds no regulatory status but will still form part of the FSA’s supervisory approach.

An FSA spokeswoman says: “In October, we introduced new procedures which increase transparency around some of our publications, including the ability for the industry to comment. This is different, and in addition, to full consultation papers which typically have a much longer consultation period.

“The report includes general guidance but does not, for example, include proposed changes in rules which would require extensive consideration.”


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. The timescales for reply to anything concerning FOS, FSA or whatever are always tight. They don’t seem to think that advisors have a life.

    It is always one rule for government departments but another rule for themselves in anything concerning them.

  2. It’s all very well for someone at the FSA to talk glibly about allowing the industry the opportunity to comment on the FSA’s never ending stream of new proposals, but what this statement conveniently overlooks are the facts that the industry is utterly punch drunk with them all and has no expectation of any of its comments being afforded anything in the way of proper regard.

    For a start, the FSA never publishes the comments it’s received, preferring merely to issue a bland and unsubstantiated statement to the effect that it’s “taken them on board”. We don’t believe you.

    If, as the you so grandly like to proclaim yourselves to be (on your website), please publish our comments and explain in exactly what ways you’ve take them on board.

    Consultation? It’s just a hollow sham.

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