Conservative MP Mark Field has tabled an amendment to the Financial Services Bill that would force the FSA to pay for section 166 reports and only levy firms if the findings lead to enforcement action.
Currently, the regulator can order firms to commission a third party to carry out s166 reports, which can cost hundreds of thousands of pounds. Companies cannot recoup the cost if no evidence of wrongdoing is found.
Aifa and advisers have expressed concern that the regulator’s use of s166 reports is increasing and that the FSA is using them as a regulatory tool rather than reserving them for instances when it strongly suspects wrong-doing.
The amendment would see the regulator appoint a third party and pay for the report. It would then claw back the cost from the firm in the event that it leads to enforcement action. The proposal is set to be debated in the bill’s third reading on April 23.
Field, MP for the Cities of London and Westminster, says: “The cost of these section 166 reports, especially for smaller companies, is another burden on firms often already feeling the pinch. Requiring the regulator to appoint an investigator and fund the reports means they will be robust and if nothing is found, the cost will not be left to the firm.
“It will focus the regulator on issuing section 166 reports only when it is seriously concerned something is amiss and not just as a regulatory tool.”
Derbyshire Booth Financial Management managing director Greg Heath says: “There is a view that the FSA uses these reports as a regulatory tool and this amendment would make that far less likely, so it is a step in the right direction.”