The veil of timidity that has been draped for so long over the Financial Services Authority (FSA) is slowly being lifted.
Criticised in the past for not being ruthless enough with firms that have shown scant regard for the new regime, the regulator now has whip in hand and is not afraid to crack it.
Those in receipt of the regulator’s wrath are not always the big boys, but smaller firms that have struggled to make sense of the new rules and have toiled to successfully incorporate them into their business models.
Catching most firms out is the Treating Customers Fairly (TCF) directive. New research shows that the number of financial penalties for breaches in TCF has rocketed.
Treating customers fairly breaches now feature in 40% of all fines imposed by the FSA, up from just 11% of fines in the previous year, according to research by City law firm Reynolds Porter Chamberlain.
Overall, the number of financial penalty notices handed out by the FSA has risen by 58% to 30 during the last year (to March 31 2007) from 19 cases in the previous year.
The regulator has a desperately difficult job to do in laying down a business framework that covers the disciplines of mortgages, pensions and investment and general insurance.
To that end, it recently announced that it was moving away from a proscriptive form of regulation to a lighter touch regime that would be principles based.
While there are many benefits to this, there are also a number of challenges. Not least ensuring that the whole TCF concept is not too vague.
The FSA is relying on firms accurately interpreting what it is the regulator expects of them. This makes operating a successful regulatory regime even more difficult for both the FSA and those firms regulated by them.
It is clear that firms need help to meet their obligations and fining them will only divert resources away from dealing with the regulatory issues with which they are currently struggling.
No one can complain when firms are criticised or fined having committed a misdemeanor. But when you are unaware of where the line is drawn, it is very easy to stumble over it.
I don’t envy the FSA in having to find a balance between proscriptive regulation and more flexible principles based approach.
Steve Walker is managing director at Promise Finance.
The views expressed in this article are those of it’s author and do no necessarily represent those of IFAonline or any other Incisive Media affiliated publication.
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