Treasury committee chairman Andrew Tyrie has called on the regulator to scrap the "fundamentally flawed" approved persons regime for advisers and instead align the sector with the new standards being brought in for the banking industry.
The call for action follows the Treasury select committee (TSC) grilling of Financial Conduct Authority (FCA) director of supervision Clive Adamson on Tuesday morning about the failings of the Co-operative Bank, which Tyrie (pictured) said exposed the "fundamental flaws" at the heart of the approved persons regime.
Tyrie asked the regulator to draw up a plan for how and when the reforms hitting the banks will be applied across the rest of the financial services industry.
The Banking Reform Act 2013 abolished the approved persons regime for deposit-taking institutions and some investment firms upon the recommendations of the Parliamentary Commission on Banking Standards.
It replaced the regime with a tougher senior persons regime and a certification scheme for junior bank employees.
The TSC learnt at Tuesday's hearing that the FCA had also been in favour of scrapping approved persons across the whole of the sector, contrary to the Treasury's plans to target only the banks.
Tyrie said: "Today's hearing provided further evidence, if any more were needed, of the fundamental flaws that have lain at the heart of the approved persons regime and in the culture of our regulators.
"These flaws contributed to the appointment of a man with no knowledge of finance and no experience of running the board of a major corporation as the chairman of Co-op Bank in the immediate aftermath of the financial crisis.
"In line with the Banking Commission's recommendations, the government has now legislated to scrap the approved persons regime for banks and to replace it with something that can add value. These legislative changes must now be matched by a fundamental improvement in the culture of our regulators.
"Financial services firms other than banks still operate under the discredited approved persons regime. That is a mistake. Adamson agrees. He told us that, in the FCA's view, the reforms being applied to banks should also apply across the rest of the financial services industry. The regulators now need to tell us how and when this will be accomplished."
Here is what an overhaul of the regime could mean for advisers.
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