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‘Show us the promised land of regulatory divis’

Eddie Grant
Eddie Grant: ’Lighter-touch style of regulation’

Aifa and the Personal Finance Society have renewed calls for the FSA to offer regulatory dividends for firms working to comply with the retail distribution review.

Aifa policy director Andrew Strange says regulatory dividends were “part of the promised land” at the start of the RDR process but benefits have yet to materialise.

At a Money Marketing Pave the Way to Save round table last week, Strange said: “The absence of the regulatory dividend is tantamount to admitting the RDR has not worked. If the regulator is going through the RDR process to make the advice sector more of a profession and more trusted, surely, by definition, firms that are meeting the requirements need less compliance.”

PFS president Eddie Grant said: “There really should be some kind of regulatory dividend for RDR-compliant firms. If a firm has committed to professionalism, then it is important it is rewarded for that.”

Cicero Consulting director Iain Anderson said: “The regulatory dividend piece was absolutely part of the quid pro quo when the RDR process started. Then the crisis hit. The opportunity to reduce costs and reduce compliance through a regulatory dividend that rewards firms for tooling up seems to have got lost.”

Strange believes there are a variety of ways that regulatory dividends could be applied, such as lower capital requirements, lower fees, or fewer regulatory visits for those firms that have higher qualified staff or have invested heavily in IT and compliance systems.

He added: “If a firm that had advisers at QCF level four, that was a member of a professional body or trade association, that held capital beyond the levels it had in the past, that had low levels of complaints or no complaints at all, if that firm was only going to be visited every five years rather than every three years, that would save the firm money and act as an incentive for people to move in the right direction in the industry. So why not do that?”

Grant said the regulator should take a less stringent approach in supervising RDR-compliant firms.

He said: “If a firm can show it has adopted a certain set of standards, perhaps the regulator could apply a lighter-touch style of regulation to those firms.”

Andrew Strange
Andrew Strange: ’Absence of dividend is tantamount to admitting the RDR has not worked’

Anderson believes there is a chance that those in power in the new regulatory structure may be open to the arguments in favour of regulatory dividends.

He said FSA chief executive Hector Sants and Bank of England deputy governor for financial stability Paul Tucker have recently publicly discussed a shift from rule-based regulation to regulation based on judgement.

Anderson said: “To hear Hector Sants and Paul Tucker, the individuals who are going to be deputy governors of the new overarching structure, start to talk about judgements, that gives me some hope that there is a chance to push the debate on regulatory dividends all over again.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Now we see whats really going on, our so called representatives are possibly not representing its members

    So we now assume having qualifications makes you a professional.

    If I have a law degree am I solicitor?
    If I have a medical degree am I a doctor?

    I think not without the relevant experience.

    And if I have level 4 does it make me a better adviser, no.

    It just makes me more technically savvy even though you may not use half of it.

  2. There are far more important issues to deal with before we even get to regulatory dividends.

    The whole system is a complete mess and no one seems to have any clear idea of a workable effective solution. The framework of regulation is wrong to start with and unless that is changed no amount of “new” solutions will be very effective as they are being built on unstable and unsuitable foundations.

    The effects of the FSA and their method of regulation need a thorough and comprehensive review ASAP, not just a change of name, we need to know the cause, effect and indeed the total cost of the FSA and their method of regulation since they were introduced by New Labour. Did it work and was it cost effective and did it really protect the consumer ?

    How you can just continue after our worst financial crisis for many decades with so may failures time and time again by our regulator yet we had the strongest regulation during that same time staggers me.

    Why is no one accountable at the top anymore.

    “Fairness and “responsibility” and “justice” are key “coalition” objectives, so why do they ignore then completely when it comes to regulation?

    Why do we even have a regulator that is unaccountable to Government?

  3. The FSA declines to comment on the above proposals. So much for engaging in a constructive and open manner with the industry it claims to regulate.

    On its website, the FSA attempts to portray itself as some kind of cosy club in which its members are willing, enthusiastic and supportive participants in the FSA’s never ending quest for the Greater Good of all mankind. How much further from the truth could that possibly be? Well, not quite as far as the FSA’s claims to be “an open and transparent regulator”. Such claims surely constitute self-misrepresentation of the most distastefully mendacious kind.

    Given that one of the most common complaints about the FSA is its lack of acountability, one might reasonably as just what, if anything, is AIFA doing to hold the FSA to account in respect of its wilful disregard for the Statutory Code of Practice For Regulators? The answer, I think, is self evident. Why isn’t AIFA forming an alliance with Regulatory Legal or mounting legal challenges of its own? Some might say that it’s because it lacks the necessary backbone. Meetings and loobying and grand statements in the press are all very well, but if the regulator takes no notice, what’s the point? Actions speak louder than words but unfortunately AIFA seems unwilling or unable to grasp this idea and ACT.

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