It is encouraging to see Zurich and Aifa picking up the cudgels in the battle for the restoration of the 15-year long stop, a crusade that I and many others have been pursuing for over five years. Maybe Aifa has finally turned the corner and will start fighting for important issues that were previously ignored.
This issue sprang to mind again when I learned of the resignation of FSA head of investments policy Peter Smith. It served to polarise some critical differences between the regulated and the regulator. One of these is the legal protection which they enjoy.
Lest we forget, the FSA and its officers cannot be sued unless guilty of malfeasance so they have no need for time bars or long stops.
At a Treasury select committee inquisition, chief executive Hector Sants suggested that if FSA officers were liable to prosecution, it would be difficult to find staff.
Contrast this with an advisory firm which falls foul of some “invitation to claim” fiasco, such as Arch cru or the pension reviews. Both logic and law are suspended and the firm finds itself a convenient cash cow for the caprice of a regulator.
At best, the firm’s professional indemnity insurance plan may cough up and pay the bulk of any claims but there is great potential for the firm to be sunk by PI policy excesses and possible FOS awards. If the firm goes under, then the rest of us are prevailed upon to meet further “losses”.
Firms are not able to take the FSA to court and, even if it were possible, the cost and unpredictability of obtaining a judicial review makes such a course unlikely. The same hurdles apply when dealing with a dodgy ombudsman decision.
Now reflect on the position of ex-FSA managing director Clive Briault who left the FSA with a final year’s package of £883,711 and a pension fund then valued at £931,000.
Many others have left of their own volition to well- paid sinecures with big accountancy firms and major insurers. Peter Smith is off to Dubai, where he will be distanced from the fallout from the RDR.
Of course, when the RDR mirage is shattered and blame is being ladled out, the guilty parties will be able to hide behind the alibi of collective responsibility.
Consider another marked contrast between practising advisers and their regulatory counterparts. Advisers help create wealth, they assist borrowers and they protect families and businesses and in so doing they relieve the strain on the NHS and the Exchequer.
Regulators? They create nothing – other than constant change. They exist purely as a result of successive Governments needing to show they are doing something.
The FSA is independent of Parliament and is therefore a convenient scapegoat or “world-class regulator”, depending on the prevailing political climate.
Finally, many proponents suggest the RDR will transform us into a profession such as solicitors. They say the removal of commission and the rise of fee-charging will invest consumers with confidence. It was therefore instructive to read the comments of Lord Neuberger, the Master of the Rolls, in his recent speech to the Association of Costs Lawyers. He argued: “Hourly billing at best leads to inefficient practices, at worst, it rewards and incentivises inefficiency.”
Alan Lakey is partner at Highclere Financial Services