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Tories want FSA reform to lessen IFA burden

The Conservatives are calling for radical reforms to the FSA in a bid to reduce the burden on IFAs and place competition at the heart of the regulator.

But the Treasury says the Tory recommendations are either restating current policies or based on misunderstandings of how the regulator works.

In a report presented by Shadow Chancellor Oliver Letwin, the Tories say the FSA must rid itself of a culture of regulatory self-protection.

A Conservative Government would set a new competition remit, appoint independent directors for the FSA and the Financial Ombudsman Service and transfer scrutiny of the FSA away from the Treasury select committee to another Commons committee.

Other measures include pressing for an immediate moratorium on all new EU directives and setting up a detailed review of mortgage regulation.

The report also calls for the deregulation of the venture capital industry, except where it raises funds from retail investors.

Another proposal aimed at benefiting IFAs is the reform of the FOS complaints’ procedure, requiring the complai-nant to pay an up-front refundable fee. The report says current rules are balanced unfairly against advisers.

It says current FSA statutory objectives are not consistent with maximising competition in the financial sector and calls for competition and competitiveness to be made part of the FSA’s core remit.

The report goes on to suggest that each new FSA regulation should come with a sunset clause, expiring after a set period of three to seven years depending on the size and importance of the regulation.

It also suggests that res-ponsibility for financial education of the retail customer is passed from the FSA to the Department for Education and Skills, with a budget set aside each year to achieve this goal.

The Tories say they would review the FSA six months after the new reforms are introduced to ensure that FSA staff numbers are being reduced and a new culture has been put in place demonstrating a lighter touch.

Letwin says: “The City of London is a global financial powerhouse. We need to ensure that it continues to make its vital contribution to our economy. That means ensuring that consumer protection and financial stability are achieved in the least burdensome manner possible. The measures we have announced are intended to achieve just such a balance.”

A Treasury spokesman says: “Today’s proposals simply repeat current features of the regime or reflect misunderstandings of how it operates. They are either unnecessary or impractical.”

Syndaxi principal Robert Reid says: “In simple terms,I think we have reached the stage where a one-size-fitsall regulatory system does not work and has been proved not to work.”

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