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Year of fear for FSA but levy breaks on advisers

In March 2009, FSA chief executive Hector Sants warned that “people should be very frightened of the FSA” and this year the regulator redoubled its efforts to keep the industry fearful.

In 2010, the FSA has more than doubled the total of fines to £84.8m from £35m in 2009, which was itself a 142 per cent rise on the previous year.

Lansons Regulatory Consulting director Richard Hobbs says: “The FSA has lived up to its billing to be more intensive and intrusive.”

But Hobbs believes the proactive stance that Hector Sants pledged in March 2009 has yet to emerge.

In July, the Government confirmed the FSA is to be split into the Prudential Regulation Authority and the Consumer Protection and Markets Authority. Many IFAs might have been pleased to hear of the demise of the FSA but there will be no let-up in regulatory scrutiny and fees could rise as some firms will be regulated by both the CPMA and the PRA.

Informed Choice managing director Martin Bamford says there will be no reduction in oversight of financial services and adds it will be “more of the FSA under a new name but with more in-depth data reporting than the current approach”.

IFAs have always complained about the FSA’s lack of accountability but Hobbs says it is not likely the new regulator will be subject to a higher level of independent review.

The other big regulatory issue for IFAs has been over the Financial Services Compensation Scheme, particularly after the failures of firms such as Keydata, Alpha to Omega, Integrity, Wills & Co, NDF, DRL and Arc.

In March, the FSCS issued an interim levy of £80m on investment intermediaries to cover claims, bringing anger from firms which have to pay for failures of rivals and protests at why structured product providers were lumped in with intermediaries.

In November, law firm Regulatory Legal took this second issue to the High Court with a judicial review to specifically challenge the £58m levy on Keydata. The court has not yet published its decision but IFAs should know soon if the challenge has paid off.

FSA authorisation times were an issue in 2010, doubling from an average of 12.2 weeks to 21 weeks this year, according to Reynolds Porter Chamberlain. These increased waiting times come despite fewer applications.

Many of the 240 former Park Row advisers have been waiting for reauthorisation for over a year. A lot of the advisers applied to the Personal Touch network and the firm’s group sales director Dev Malle says: “The trend has been for the FSA to tighten up its authorisation process and we expect this to get even stricter in future.”

There was more progress on the RDR front. The first QCF level four exams were launched in the first half of the year and gap-fill tools are available so advisers can establish what they need to do.

The debate on grandfathering and qualifications is still raging and lobbying efforts finally paid off in November as MPs started to take notice of the issue. The House of Commons debate on November 29 was the most high-profile external scrutiny of the RDR and hopes have been raised that some concessions could be wrung from the FSA.

Cicero Consulting chief corporate counsel and director Iain Anderson says: “We are definitely in a different place now than we were before the debate. The pressure it generated may unleash some concessions but the first quarter of 2011 will be crucial.”

The most likely concessions could take the form of allowing extra time for IFAs who have practised for a certain period.

But Hobbs believes IFAs should not get their hopes up and says the FSA is more flexible on its approach to use of wraps and platforms and says: “Wraps and platforms are open for consultation. The FSA would be more amenable to changes to what it is proposing in these areas but I doubt that we will see any concessions on professional standards.”


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There is one comment at the moment, we would love to hear your opinion too.

  1. So the FSA is being more intrusive, levying more fines and generally cracking down here, there and everywhere, yet still it seems to be intent on making life as difficult as possible for IFA’s seeking authorisation or reauthorisation. Do we see a pattern emerging here? Yes we certainly do. The banks, meanwhile……….

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