The Association of Independent Financial Advisers (AIFA) is urging the Chancellor to reconsider plans to direct regulatory fines to government coffers.
In the light of the Barclays LIBOR scandal, George Osborne announced he would change the rules to ensure that fines go into the Exchequer's pot to "help the taxpaying public".
Under the current system, fines are used to offset the following year's fees and levies.
Chris Hannant, policy director at AIFA, confirmed he was writing to the Treasury on the issue and explained the trade body's concerns.
"Although it is inappropriate that banks should benefit from their own fines, to effectively punish the wider financial services sector doesn't seem right to us," he said.
"Even if they don't want to see it going towards the industry, we can see other vehicles that would have wider benefits.
"It could be used to benefit consumers as well, for example by going to Financial Services Compensation Scheme funding. Everyone is struggling with their bills."
He also pointed out that, by introducing the change as an amendment to the Financial Services Bill, the industry would not be consulted on the issue.
As a government amendment, it is likely to pass smoothly through the House of Lords, meaning it was necessary to alert the government to the damaging impact it could have.
Demonstrating the potential financial to advisers, he explained how the dynamics of fines affect their regulatory costs.
"This year, a lot of advisers are seeing their bills rise, just because the fines in the last year were significantly lower than in the previous year," Hannant said.
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