Other Citywire websites
Stay connected:

View the article online at http://citywire.co.uk/new-model-adviser/article/a635100

FSA panel warns over PI providers excluding FSCS claims

by Michelle Abrego on Nov 16, 2012 at 12:35

FSA panel warns over PI providers excluding FSCS claims

The Financial Services Authority’s (FSA) Smaller Business Practitioner Panel has raised concerns over new professional indemnity (PI) insurance policies which exclude paying out on Financial Services Compensation Scheme (FSCS) claims.

Minutes from the FSA board meeting of 27 September show that the panel warned the regulator’s board that many PI insurers did not understand recent regulatory developments faced by small firms.

It highlighted ‘problems associated with new PI policies excluding FSCS claims’.

The minutes said: ‘The board noted the difficulties and lack of understanding of some insurers regarding regulatory developments and associated risks, and the problems associated with new PI policies excluding FSCS claims.’

9 comments so far. Why not have your say?

Julian Stevens

Nov 16, 2012 at 13:16

It might help if the [.........] FSA was to refrain from:-

1. instructing the FSCS to short-circuit the normal complaints process by declaring prematurely its intention to pay our willy-nilly on provider failures such as ArchCru or, worse still, by

2. presuming guilt without having considered properly the relevant evidence and instructing legal firms such as Herbert Smith to send out aggressive letters to IFA firms stating bluntly: The powers that be have decided you're guilty, so pay up or else, thereby enabling PI insurers to invoke a policy exclusion clause.

How can the FSA be allowed to drive a coach and horses through what's supposed to be an established process for customer complaints, particularly when in many cases the customers have had no actual intention of complaining? The answer, of course, is that no body exists to stop it abusing its powers and trampling small firms underfoot like tiresome and inconsequential insects. So much for Hector Sants' tepid denial before the TSC in March 2011 that the FSA has no prejudicial agenda against small IFA firms. White man speak with forked tongue.

report this

Jenny N . I FA

Nov 16, 2012 at 14:28

I totally agree with you Julian, well said.

report this

Sam Caunt

Nov 16, 2012 at 14:44

Must be missing something here. FSCS is the port of last call for clients of firms that are in default. The firms are are insolvent, have no assets. They do not have PI cover since most policies exclude cover if the insured is insolvent or bankrupt.

Can someone explain?

report this

Olivier Dacourt

Nov 16, 2012 at 14:47

Agreed Julian 100%

Add to that the EEA Life settlements fund which the FSA decreed to be toxic and which has led to the suspension of a perfectly reasonable investment.

Why are they able to get away with all these gaffs?

report this

Julian Stevens

Nov 16, 2012 at 15:11

Lack of accountability, which is why I keep banging on about the need for an Independent Regulatory Oversight Committee.

report this

Olivier Dacourt

Nov 16, 2012 at 15:37

Get a petition going, we only need 100,000 signatures....However it happens, it has to happen so please keep banging on about it.

You have my support

report this

Peter Davies via mobile

Nov 16, 2012 at 16:13

And the vote could have been included on the Police Commissioners ballot paper yesterday!! We might have had a higher turnout :)

report this

Julian D

Nov 16, 2012 at 16:25

You've got my vote Julian. Where do I sign?

PS. Very well put, I couldn't have said it better myself.

report this

Julian Stevens

Nov 16, 2012 at 17:30

The trouble with petitions to the government is that they require a minimum of 1,000 signatures before the subject is even considered, let alone any action taken on them. In all probability, the FSA/FCA would respond to any official questions from, for example, the TSC, in much the same way as Hector Sants did in March 2011, by way of that tattered old flag of consumer protection. He claimed that the FSA had considered the possibility of restoring the longstop (oh yeah?) but had decided that it couldn't see how so doing would be of benefit to consumers.

No one on the Committee had any sort of comeback to that because how do you demand that the regulator should remove what it's claiming to be an important element of its mission to protect consumers? By that line of reasoning, Hector Sants might even have felt able to defend the practice of tarring and feathering errant IFA's then stringing them up on a cross outside their offices, as an example to others, on the grounds that to stop doing so wouldn't benefit consumers.

A lot of careful lobbying of Parliament is going on behind the scenes, not least to try to get MP's to appreciate just how dangerous an unbridled and unaccountable monster such as the FSA can be to so many people who really are trying to do their honest best for their clients but who, as a result of so much that the FSA has done (which isn't to say that it doesn't done any good things), are being crushed to oblivion.

I believe we should put our weight behind APFA and ask them why they aren't lobbying and campaigning harder not just on the issue of the FSA's denial of the longstop but on other issues too such as:-

1. the FSA's wilful disregard for the Statutory Code of Practice for Regulators (to which the TSC appears to be tacitly oblivious, despite the very bloke who wrote the foreward to the Code now being a member of the Committee),

2. its reckless profigacy with OPM (why do 4,000 regulatory staff need to be housed in an office that costs us £68.5m p.a.?),

3. the injustice of extorting from the industry £107m to make good the funding shortfall in the FSA's final salary pension scheme (which many consider it should never have had in the first place ~ wind the bloody thing up, shortfall and all),

4. its endless programme of hindsight reviews (a practice which, to be fair, Martin Wheatley has said the FCA won't perpetuate ~ but we'll see),

5. its freedom to dump on the IFA sector the consequences of its own failings, particularly when a provider founders,

6. a ban on any future golden parachutes for the likes of Clive Briault (arrant levy payer fraud if you ask me, but there wasn't a damned thing we could do about it),

7. its totally unreasonable and inflexible stance on commissions from legacy products (which could be addressed by way of Customer Agreed Commission, with any excess rebated directly to the client),

8. a proper system of fiscal policing (as opposed to a token once-over of its books by the NAO once a year) so that the regulator won't be free to blow tens of millions of pounds commissioning all sorts of outside surveys, reports, analyses and all the rest of it without reference to anyone (just cap that corner of its budget at £2m p.a.). Oh yes, there was also that £1m stationery bill in 2010 I seem to recall ~ how the [......] do you spend £1m on stationery for Christ's sake? And

9. force the regulator to publish for all to see and to debate in open forum all submissions in response to its presently patently phoney "consultations" and

10. if the regulator is to be allowed to continue to pay bonuses, then the justification for them should be subject to rigorous scrutiny from an outside agency.

Those are just the first 10 things that spring to mind of the top of my head.

Your MP is unlikely to be of much value in the fight against these injustices. Mine certainly wasn't because the FSA is comfortably adept at fobbing off and stonewalling letters from MP's, who then report back to you with a copy of the reply they've received and consider their duty done.

APFA may have little or no clout but that isn't APFA's fault. It's doing its best, it's asking the questions (well, some of them) and it's seeking to form alliances with MP's, which take time and skill to build. If an IROC ever is created, in all probability it will be staffed by MP's, so they're the people who need persuading that such a thing is actually needed. In what body other than APFA can we place our hopes and trust?

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Long time coming: is the recovery here to stay?


Click here to watch a series of sponsored interviews with Jupiter's fund managers on the UK equity market.

Today's top headlines

More about this article:

Archive


Read more...

FCA bans two advisers over unsuitable Sipp advice

by Michelle Abrego on Apr 17, 2014 at 10:24

Sorry, this link is not
quite ready yet