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Bills, battles, and bans: the year in news

Even in the ever-changing world of financial services, 2012 will go down as a particularly dramatic and eventful year. With the retail distribution review on the horizon, it was always going to be a busy 12 months for advisers, providers and even the regulator itself, which spent a good portion of the year trying to tie up all the loose ends attached to its reforms.

A pile of bills from the FSCS

The year kicked off in much the same way as it is ending. The winter chill had barely begun to lift before the Financial Services Compensation Scheme (FSCS) hit advisers with a £60 million interim levy for 2011/12; and just as the year began to draw to a close, the scheme announced a £25 million interim levy for 2012/13.

It has not exactly been quiet in between those two announcements, even at the FSCS, which also squeezed in a £78 million annual levy and prepared to overhaul its funding model following proposals from the regulator. But plus ça change, plus c’est la même chose. The proposed changes to the FSCS would leave advisers even more short-changed than they are now by exposing them to even higher potential levies.

Arch Cru and Keydata take toll

It wasn’t just through large levies that the FSCS incurred the wrath of advisers in 2012; IFAs who sold Lifemark-backed Keydata products found themselves on the receiving end of legal action from the scheme. The FSCS turned to the law in April last year, following similar action against IFAs who sold SLS-backed Keydata products in 2011; and both cases are still rumbling on.

Advisers with clients in the failed Arch Cru funds were dealt an equally difficult 2012. The Financial Services Authority (FSA) in April revealed plans for a £110 million redress scheme funded by advisers found to have mis-sold the funds. That sparked outrage, with advisers accusing the regulator of ignoring the failures of providers over Arch Cru.

But while authorised corporate director Capita was the subject of a pretty humiliating FSA final notice detailing its litany of errors, it managed to escape a £4 million fine. The fate of advisers is not yet clear, with a FSA policy paper on the proposed scheme yet to appear.

Regulator’s policy out-tray blocked...

The regulator’s platform policy has also been hit by delays. That policy had already been removed from the RDR due to complications, and now the policy paper promised for the end of the year will not appear until the next. A ban on cash and fund manager rebates is on the cards, although the regulator hasn’t been shy of a U-turn in the past.

Ban this filth

The regulator was more decisive when it came to unregulated collective investment schemes (Ucis) which it effectively banned this year after a wave of mis-selling cases.

In August the FSA confirmed the clampdown on the sale Ucis to retail investors after New Model Adviser® broke the news of the impending ban in April, alongside the fact the regulator had nicknamed Ucis ‘sex and violence’ due to its risky nature.

Feeling inadequate

While advisers may have hit the headlines for Ucis mis-selling Sipp providers have never been far away from the story. The FSA left it late but in among all the RDR work it found time to publish new capital adequacy rules for Sipp operators. Under plans published in November the absolute minimum capital a Sipp operator would have to hold will increase from £5,000 to £20,000.

The FSA also proposed there would also be an additional requirement for providers that hold ‘non-standard’ asset types such as Ucis. This is because they will take longer to transfer in a wind-down situation. The FSA said it would produce a list of standard assets for this purpose.

A hard time for nationals

It hasn’t been a happy year for national IFAs. Bluefin, which was put up for sale by parent AXA, found itself left on the shelf after Capita opted to buy only the corporate advice wing of the group. Towry – which will no longer be a national IFA having opted for restricted status post-RDR – suffered a blow after losing its high-profile court battle with Raymond James over alleged client solicitation in February.

Towry chief executive Andrew Fisher found it difficult to stay out of the headlines during the year, as he was also named in one of The Times’ investigations into the tax affairs of the rich and famous. The paper’s exposé of Jimmy Carr’s arrangements may have excited the interest of the prime minister, but the Fisher revelations prompted the most debate on the New Model Adviser® website.

Networking / Not working

If nationals had an uphill struggle, networks faced Everest. Their commission-based stack’em high model was always under threat from the RDR, but increased professional indemnity (PI) insurance costs and a Narnia-like closet containing an army of skeletons proved their ultimate undoing.

The biggest casualty of the year was Honister which entered administration in June due to hiked PI costs to cover legacy issues, including 88 claims worth over a combined £10 million against a single Burns Anderson adviser who allegedly mis-sold unregulated property investments through a Sipp.

Other networks which had a year to forget included Pi Financial which was fined £58,300 by the FSA over the sale of - yes you’ve guessed it- Ucis, and structured products.

Lighthouse also endured a torrid year with its failed attempt to delist from the AIM market leaving its board red-faced and then executive chairman David Hickey heading for the exit.

Restricted view

The Association of Independent Financial Advisers enjoyed an eventful 2012. Things kicked off with the departure then director general Stephen Gay. Gay, who moved to the Association of British Insurers, had only been in the job for a year, and oversaw the body’s move to allow restricted adviser membership.

The restricted shift was confirmed later this year when the body changed its name to the Association of Professional Financial Advisers.

The year also saw Chris Hannant join as policy director, who spearheaded the trade body’s campaign for a long-stop and against the FSA’s Arch Cru redress scheme.

Getting legal

Apfa was not the only the organisation to embrace restricted advice as the Solicitors Regulation Authority (SRA) controversially ruled solicitors no longer had to make referrals to just independent advisers.

The move came after a long consultation process which seemed only to confirm what the SRA always had planned. It provoked outrage from the Law Society which warned restricted referrals could lead to solicitors becoming embroiled in mis-selling scandals.

A flurry of farewells

2012 was also a year for high-profile departures, most notably at the FSA, where chief executive Hector Sants (who has since reappeared at Barclays), managing director Margaret Cole and head of investment policy Peter Smith headed for the exit.

At Aviva, chief executive Andrew Moss quit in dramatic circumstances, after mounting shareholder anger over executive pay during the brief shareholder spring.

But it was Bob Diamond’s departure from Barclays that accounted for the most column inches, following the bank’s £290 million fine over Libor-rigging.

It’s been anything but a quiet year, but those looking for some respite and a calm 2013 are likely to be disappointed.