European directives affecting the UK financial services sector should be scrutinised more closely as are likely to cost significantly more than existing FSA regulations, says Beachcroft Wansbroughs Consulting.
Following a meeting of the Committee of European Securities Regulators yesterday in Paris, investment regulation consultant Oliver Lodge at Beachcroft Wansbroughs says the costs and flexibility associated with new EU regulations need to watched more carefully as – unlike the UK market – cost benefit analysis is not conducted, and could therefore cost much more to implement than its regulatory worth.
Lodge refers, in particular, to proposals for the Markets in Financial Instruments Directive (MIFID) which are now being set out to replace the Investment Services Directive in 2006.
In his speech at the CESR meeting, Lodge pointed out many of the draft requirements would incur considerable expense, which will ultimately be borne by consumers.
"The need for flexibility in the requirements is all the more important because of the practical problems associated with procuring amendments.
"Drafting of the regulations should provide sufficient flexibility to deal with innovations in the market over the coming years.
"It is crucial that there is a waivers process to enable national regulators to set aside detailed requirements wherever they are clearly inappropriate," said Lodge.
Little is known about the MIFID at this stage, but one proposal on the table is a requirement for all investment intermediaries to hold Euro1.5m worth of professional indemnity cover.
If this proposal is implemented, it would supercede the FSA’s plans to allow firms the right to hold a waiver against needing PI and instead hold additional capital to cover any potential compensation claims.
Beachcroft Wansbroughs Consulting is the financial services division of commercial law firm Beachcroft Wansbroughs.IFAonline
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch
To drive progress