Statutory regulation is still on course for October. Under the legislation claim-chasers will need to be authorised, fulfil professional indemnity and capital adequacy requirements and undergo background checks. The authorisation process will start in November, with a deadline for applications in February next year. Firms involved in claims management activities which dodge regulation, including advisers which introduce complaints to claims management firms for commission, will face fines or prosecution. In short, claims chasers will be subjected to many of the same regulatory checks and balances as IFAs – surely good news.
The former director general of the ABI Mark Boleat has been named as the claims chaser “tsar” (apologies – it’s hard to make the regulator of claims management firms sound sexy). He will work for the Department for Constitutional Affairs and will oversee a monitoring and compliance unit, run by one of the UK’s as-yet-undecided local trading
This will perform the dirty work required of any regulatory regime – background checks, processing authorisations, monitoring compliance and recommending enforcement action.
The appointment of Boleat has been generally welcomed in the industry. His hard-hitting report released earlier this year on regulation of the claims management sector clearly won him admirers in and around Westminister. His highly effective dissection of the Claims Standards Council, which had been rashly proclaiming itself as the regulator-in-waiting and threatening to wage “nuclear” war on rogue claims chasers, effectively relegated the outfit to trade body status.
As CSC spokesman Andy Wigmore points out, showing no trace of ill-will, Boleat is both well connected and experienced in the legal profession, the financial services industry and in political circles.
But concerns have inevitably been raised over the seemingly paltry 1m budget which has been put aside to set up regulation of a fragmented market – described by Boleat himself as very difficult to police. Commentators have raised concerns over the fact Boleat will only assume the role on a part time basis, continuing to perform consultancy work. The appointment of a local trading standards office, after a competitive tender process, to run the compliance and monitoring unit tracking activities across the whole of the UK, has also raised a few eyebrows and led to fears that claims management regulation, when sitting alongside all its other duties, will not be given sufficient priority.
While these concerns are understandable, even Lord Hunt of Wirral, who was an outspoken advocate of the FSA for the job, has urged critics to give the regime a chance and wait to see what proposals the local trading standards offices competing for the contract come up with.
On a completely different note, there was some good news for advisers last week as the FSA announced they will be spared from conducting expensive audits of their business. The Department for Constitutional Affairs has undertaken to push through the reform as quickly
The tabled reform is a perfect example of proportionate, common sense risk-based regulation. The FSA estimates the change will save 3,200 small firms and 1,490 appointed representatives GBP12.9m a year. It also points out other safeguards such as the Retail Mediation Activities Returns, capital adequacy requirements and the fact that firms handling client money will still be subject to audit requirements, will ensure the move will not put consumers at risk.