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FSA plans overhaul of adviser supervision

by Michelle Abrego on Oct 02, 2012 at 10:25

FSA plans overhaul of adviser supervision

The Financial Services Authority (FSA) is planning a radical overhaul of the way it regulates financial advice firms, cutting the number of financial services firms that have a relationship manager from 2,000 to less than 100.

Currently 2,000 firms including national IFAs, networks, asset managers, and banks, have a FSA relationship manager responsible for their supervision.

New Model Adviser® understands this number will reduce to less than 100 when the FSA transforms into the Financial Conduct Authority (FCA) in 2013.

The FCA will instead use increased powers to issue a greater number of skilled persons reports, also called section 166s, with the bill footed by the firm being reported on.

The regulator is asking compliance consultants, qualified to carry out section 166s, to apply to be on its panel.

If an IFA business is instructed to commission a section 166, it must use one of the consultants on the panel.

A source familiar with the situation said: ‘When [the FSA] moves into the FCA, there will be a substantial reduction in the number of relationship-managed firms.’

In a recent speech to asset managers, incoming FCA chief executive Martin Wheatley said the new regulator would ‘have fewer supervisors attached to particular firms’.

Bovill compliance consultant Russell Weekes, who worked at the FSA for 11 years, said: ‘I’ve certainly got the impression that skilled person’s reports are now the mainstream supervision tool. This is interesting and it’s not great, because they’re not cheap and the firm pays the cost.’

Tim Sutcliffe, managing director of network Pi Financial, which was recently fined £58,000 by the FSA following the findings of a section 166, said the cost of reports could be problematic for advisers as consultants’ fees ran into six figures.

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28 comments so far. Why not have your say?

David Craik

Oct 02, 2012 at 11:41

We have come to expect and accept no more of the FSA! Why not get rid of the last couple that have any Technical advisory experience. We should have a sweepstake for the name after FCA.

Piss up and brewery springs to mind. - includes FOS and FSCS.

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Robert Johnsey

Oct 02, 2012 at 11:41

six figures? £1,000.00

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Sid Cynical

Oct 02, 2012 at 11:49

David Craik - Couldn't agree more!!

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Julian Stevens

Oct 02, 2012 at 12:17

So the new plan is for the FCA to micro-manage small businesses to an even greater extent and make them pay for the privilege on top of all the other extortionate regulatory levies and PII costs.

It'd hardly be surprising to learn that this is the title of just one chapter in a book ~ the FSA's Domesday Book ~ entitled How to regulate out of existence the country's most trusted, least imperfect and least dangerous to consumers distribution channel.

Never mind the Statutory Code of Practice for Regulators which talks about irksomely inconvenient things like proportionality, fairness and better treatment for firms doing their honest best to abide by the rules. We're the FSA/FCA, we can do what we like and anyone who disagrees can go jump off a cliff.

Is it any wonder thousands upon thousands of IFA's are checking their parachutes for New Year's Eve?

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Michael Both

Oct 02, 2012 at 12:27

So the FSA, sorry, FCA, is going to cut its costs massively by ditching 1,900 of its 2,000 supervisory staff so the firms it regulates can then pay for the supervision on an ad hoc basis in addition to paying the fees to the FCA for the regulation in the first place?

NURSE !! - The lunatics have all escaped and are running the asylum!!!

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David Craik

Oct 02, 2012 at 12:55

Michael - you wish!! That would be a result indeed! Sadly we keep the 1,900 staff who don't supervise and in addition we pay the big name consultants to tell us we are unsupervised.- but you are right about the asylum either way!

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Chris F

Oct 02, 2012 at 12:58

Pompous, over paid, under qualified fools.

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Mike WOI

Oct 02, 2012 at 13:20

In 30 years we will see the secret agenda set to rid this country of financial advice and who was on the original committee.

Unfortunately just like Hillsborough, no one will be left to bring to task.

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l'ifa passeport en provenance de France

Oct 02, 2012 at 13:23

so the naughty boys pay twice

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Insiders Comment

Oct 02, 2012 at 13:27

Ive said it many times....it is evident that the FSA is running away with itself rather like giving an employee an open cheque book and telling them to spend it as they wish. So it is to the employers that we must vent our anger ...This Government!! the only thing that poliuticiians understand are votes and their necks being on the line. So if you want anything to change forget the FSA they couldnt care less, aim your protests at the Government and maybe you might see some results.

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Alistair Cunningham

Oct 02, 2012 at 13:46

I seem the only person to have read this article a different way. Is what it saying that the FCA will be more streamlined (thus costs should be lower) and firms that are failing will need to pay for Section 166s (where they bear the cost themselves).

In short, good firms will see reduced cost of regulation and bad firms will need to foot the bill for the increased scrutiny?

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Chris F

Oct 02, 2012 at 13:55

To: Alistair.

The FCA are accountable to nobody.

They can: reduce their workload, retain the same number of staff and simply expect IFA companies to foot the bill. Consequences for them - all good.


They can: reduce the number of staff and apportion regulatory fees to those ACCUSED (not guilty remember) of wrong doing of some sort (remember this can be because the FCA do not understand the business). Consequences for them - some of them lose their jobs.

Which do you think will happen?

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Oct 02, 2012 at 13:55

Alistair - That's how it might work in private sector, small to medium sized businesses.

HOWEVER, this is the FSA / FCA we are talking about. You are living in cloud cuckoo land if you think there will be any cut in our FSA / FCA costs.

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Julian Stevens

Oct 02, 2012 at 14:31

"Give me six lines written by the most honest man in France and I will find in them enough to hang him." Cardinal Richelieu. Maybe Cardinal Wheatley too.

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Compliant Officer

Oct 02, 2012 at 14:55

Well I think it's an excellent idea!

Puts the onus and the cost right back onto the firms who are causing all the problems. If you're doing things right in the first place, its unlikely you'll be asked to have a s.166 report, so nothing to worry about!

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Chris F

Oct 02, 2012 at 15:11

After all, compliant officer, the FSA have had an excellent track record in weeding out the bad apples in the barrel of financial services - such as the banks, the networks that have gone under with massive debts, the tied advice companies that rip people off in their thousands etc. etc.

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Mike Morley

Oct 02, 2012 at 16:00

Funny old language English - "Fat Chance" and "SlimChance" mean the same and both pretty well sum up the likelihood of the FCA reducing staff and costs so that our fees can be lower. If they do shed any staff they will no doubt be quick to set up compliance consultancies to benefit from the actions of their ex- colleagues wishing to nail some small IFA to the door!

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Oct 02, 2012 at 16:03

@ Alistair Cunningham

"I seem the only person to have read this article a different way. Is what it saying that the FCA will be more streamlined (thus costs should be lower) and firms that are failing will need to pay for Section 166s (where they bear the cost themselves).

In short, good firms will see reduced cost of regulation and bad firms will need to foot the bill for the increased scrutiny?"

Does the amount of regulatory capital then need to change just in case the FCA ask for an independent compulsary audit of your business. The 166 provider will always need to find something wrong or will not be able to justify its fees. What if they say all is OK. Will the FCA then refund the costs. Also will the 166 with a tick all is OK, put a long stop against future claims?

No other business in the UK seems to be subject to such external interference. I think we should all become INDEPENDENT FINANCIAL GUIDANCE firms. None of us should get involved in the recomending products stage. No sales/recomendations of recomended products = No 166 orders/ No PI insurance/ No misselling/No Commission

Job done till we then say no regulation required and the FCA say NO FEES then they will start thinging about their own survival post RDR. Regulators are effectively paid based on commission from a pot ( product sales or fines)

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Mr Man

Oct 02, 2012 at 16:03

Quite amazing. These compliance firms that are to undertake section 166's will be made up of ex FSA staff, lining their corrupt pockets with after event private firm supervision,the cost of which will likely put most firms out of business. It won't just be those who are doing something wrong..it will be any one the FSA so choose. All they have to find is one thing and they can order a section 166. Hector Sants was a bastard playing with the lives of professionals in a foreign country that he no longer resides in Leaving a lasting legacy of destruction of an industry he cares little about and a country he has is taken for a ride.

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Philip Wise

Oct 02, 2012 at 16:10

How do you get on the panel? Sounds like good business to me!

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Arthur Schopenhauer

Oct 02, 2012 at 17:18

This has to stop I thought we were supposed to be in a Democracy

It was said in a course today applying similar logic to GAAR you could be arrested for something not a crime but would have been a crime if Parliament had thought about it

The Law Society has many claims for professional misconduct as does the accounting profession

In the interest of a level playing field are we to have similar Kremlin types appointed

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Jeremy Newbegin

Oct 02, 2012 at 17:25

I suspect that the FSA will only instruct sections 166s where they see problems, as Alistair Cunningham says. If, and i admit it is a big "if", the FCA only issues 166s when appropriate it will potentially reduce costs to the rest. That has to be good for those doing their jobs properly.

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Julian D

Oct 02, 2012 at 18:05

@ Alistair & Jeremy

Sorry guys, I used to be ever the optimist however as I'm getting longer in the tooth (and have been stung with their ridiculous fees too many times) now when it comes to the FSA I expect the worst until proven otherwise...

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jp via mobile

Oct 02, 2012 at 20:19

What would be really interesting would be to see the proposals put forward by the 166 panels and also for them to show any internal documents they have on their likely incomes.

If it feels like a stitch up it normally is.

I think that they should all be required to operate on a basis where if they are found to be taking too much out of the pot that their key people are personally liable.

The only other alternative will be the courts

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Arthur Schopenhauer

Oct 02, 2012 at 20:49

The only way to ensure compliance here is to have this as part of an annual compliance audit from one of the panel. It might free up some time to actually give some advice

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Richard Hardy

Oct 03, 2012 at 09:24

I'm curious to understand what set of circumstances trigger a S166 visit/report.

If the FSA/FCA simply pick a name out of the hat and then expect a firm to pay for the visit this is wrong.

If it is as a result of complaints and/or FOS/FSCS data highlighting wrong doing at a firm then I could understand it.

In the meantime it would be helpful for all firms to find out the results of other visits so we can learn what the FSA/FCA actually want from us so we can run our businesses in a more compliant fashion.

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Julian Stevens

Oct 03, 2012 at 11:51

The same fundamental concerns arise:-

1. Will the FSA be required to obtain permission from an independent regulatory authority before ordering a firm to commission and pay for a S166 report or will it have free rein to to so on the strength of nobody's judgement but its own?

2. Will firms subject to such an order have any right of appeal to an IRA or will it be a case of just having to go along with it or be shut down?

3. Will any mechanism exist to prevent the FCA misusing its powers and possibly, without reasonable justification (other than in its own opinion), being free to impose on a firm the considerable trouble and expense of a S166 report?

4. Or will the FCA have the same free rein as its predecessor to trample roughshod over any body or individual who dares to challenge it?

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Arthur Schopenhauer

Oct 03, 2012 at 19:23

@ Julian

Simple they will continue to be a sensitive and professional as the FSA even handed and reasonable as usual. Time to get passported in from Germany where they have no such nonsense

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