A Tory peer wants to amend the Financial Services Bill to crackdown on the “outsourcing” of regulation through Section 166 reports and to ensure regulatory action is “reasonable and fair”.
Under current proposals the Prudential Regulation Authority and the Financial Conduct Authority must ensure their actions are “proportionate”. Conservative Lord Hodgson says that should be extended to include “reasonable and fair”.
Hodgson, who is chairman of Nova Capital Management, also wants regulators to be explicitly required to employ staff with the “necessary knowledge, experience and expertise of the sectors they regulate”.
He says the FSA is increasingly “outsourcing” more complex regulatory work through S166s because of an existing skills gap at the regulators. He adds: ”They do not necessarily understand what they get back from these reports either. A lot are of no benefit to the firm and are simply a way of providing regulatory cover. The fact it costs the £200,000 does not come in to in in the least.”
He stops short of mandating qualifications, asking regulators to use their discretion when employing staff.
Anand Associates managing director Bhupinder Anand says: “A lack of industry knowledge is the reason we get the kind of regulation we do. These amendments are a rare case of someone talking common sense”.