FSA accused of acting tough for election

Issued: 13/05/2010 00:00:00

Leading industry figures have urged the FSA to reassess its enforcement approach amid accusations that it is trying to bolster its position for the post-election world

They have warned that the FSA's continuingly intrusive approach will do nothing to support consumer confidence in the financial services sector.

Many have noted an increase in enforcement activity since the Conservative Party first mooted scrapping the FSA early last year - and accuse the regulator of aggressive PR tactics.

The comments come after a string of regulatory prosecutions, as well as its latest involvement in The Prudential, where the FSA's investigation into its capital adequacy delayed Prudential from publishing its rights issue last week.

Chris Cummings, director general of the Association of IFAs, said: “Any organisation that finds its future cast in doubt will want to prove it is capable and competent, so will seek out opportunities to highlight how vigorous it can be.

“But I do not approve of shock and awe enforcement. The notion that you can punish an industry into observing regulatory standards is misconceived at best.”

Dorian Drew, a partner for City law firm Norton Rose, said the FSA has spent a lot of time and effort beefing up its enforcement offering under its enforcement director Margaret Cole.

Alan Lakey, partner of Hemel Hempstead-based Highclere Financial Services and founder of the Adviser Alliance, said: “The [FSA] has certainly been busy recently and there are thoughts that the regulator is now having a final pop at them to prove it is full of regulatory devils, as opposed to the soft-on-banks peaceniks that the regulator has been portrayed as by some MPs.”

He added that as there were rumours that Ms Cole is poised for the role of chief executive, once Hector Sants leaves, there may be a connection between her current role in enforcement and this seemingly new, tough approach.

Evan Owen, founder of the IFA Defence Union, said the FSA's approach could be described as “grandstanding”, especially in the light of its own uncertain future post-election.

He said: “The FSA has been suffering the slings and arrows from all quarters and rightly so. If observers have deduced that the perceived increase in activity means anything, then they are probably right.”

Keith Richards, distribution and development director of the Tenet Group, said the FSA's attitude does nothing to reassure consumers or demonstrate quality regulation.

He added: “It is disappointing that after 20 years or more of regulation, consumers will simply see a regulator again waving the regulatory stick. This will do nothing to improve confidence in an industry that is already challenged, and a society affected by the lack of clear accessibility to straightforward savings and investment advice.”

However, the FSA has defended its tough stance, branding this sort of speculation as “mischievous nonsense”.

Lee Caulder, spokesman for the FSA, said: “This sort of speculation is mischievous nonsense. anyone looking at our business plans will have known that, in 2007, we outlined a process whereby we were taking a firm stance on enforcement activity.

“Yes, there have been many high-profile criminal actions in the past month, but these are the result of cases that have taken years to come to fruition. It is ridiculous to suggest that, back in 2007, the FSA decided to work to a 6 May 2010 deadline. As for comments about any high-profile cases where we are conducting investigations, this is something with which we are tasked, to protect the interests of the sector and the public.”