The FSA has declared 2007 as the year of treating customers fairly for advisers, with a much signalled March crackdown on firms that have not shown they are well on their way to implementing the principles.
Anyone who thinks that the deluge of consultations and discussion papers which hit the financial services industry in 2006 will be curbed this year could be in for a shock, with January already looking busy.
A training and competency consultation will see the regulator trying to negotiate a way around the dilemma which is being posed by the European Union’s Mifid directive of either allowing an unlevel playing field to develop or relaxing examin-ation requirements for advisers, with potential downsides either way.
We can also expect the results of the consultation into future funding for the Financial Services Compensation Scheme after the regulator’s January board meeting.
When the consultation came out in March 2006, the FSA appeared to favour an approach meaning providers cross-subsidise advisers according to product class, supported by Aifa and the FSCS. But industry sources suggest that the FSA is now willing to separate providers and advisers into sub-classes, after strong lobbying from the likes of the ABI and the IMA.
After the March TCF deadline, the regulator will be doing follow-up work to ensure that the regime is continuing to be embedded and iron out any problems it finds from investigative work.
The next landmark looks like being the National Audit Office’s review of the regulator which will be laid before Parliament in April and, according to sources, will make some explosive recommendations about the current structure of the regulator.
In the summer, the FSA is expected to publish an initial paper on the retail distribution review, following the work of the five committees it set up to investigate how to “fix” the industry.
The Personal Finance Society public affairs director John Ellis says the review will overshadow most other events in 2007.
“This review is going to ask fundamental questions about what an adviser offers the consumer and the industry with everything to play for. We need to show how we can develop a service that genuinely meets all the needs of the public,” says Ellis.
Autumn sees the implementation of Mifid and alongside it the introduction of Newcob which will scrap much of the rulebook, replacing detailed small print with general high-level principles.
CMS Cameron McKenna partner Nick Paul says that although advisers will face a much shortened rulebook, they must ensure they take this new regulatory world seriously and not expose their businesses to the risk of non-compliance and FSA action.
The industry will also begin to see the results of the FSA’s work on industry guidance,with designated bodies having their rules rubberstamped by the regulator to supplement these principles.