18th August 2011

Annoy in haste, repent at leisure?

With press headlines in July saying “Select Committee set to launch review into the accountability of both the Bank of England and the incoming FCA on the back of "deep concern", it really should come as no surprise that The Treasury Select Committee (TSC) has officially launched an inquiry into the accountability of the Financial Conduct Authority (FCA) following the FSA’s knee jerk and poorly timed response to the TSC RDR Review published last month. After all, as Mark Garnier MP commented, if the FSA ignores the report there will be some very “upset politicians”.

Chairman of the TSC, Andrew Tyrie MP, warned, "No institution, however powerful, should be unaccountable". And he is no doubt a man with ‘form’ to be reckoned with.

However, is there any justification for spending a lot of Parliamentary time and money because no other mechanism exists to place curbs on the new and shiny FCA, which many IFAs believe that it will be just a  re-badged FSA?

Our survey on the subject conducted last month makes clear views on that point.

It would seem that politicians might be unaware of ‘The Regulators Code’. This is an important document and should be considered by the FSA in its makeover to the FCA.

The Regulators Code makes interesting reading, in fact you can access it on our website and we have made both Andrew Tyrie and Mark Garnier aware of it’s existence.

Its aim, well stated in a foreword by Jim McFadden MP is to embed a risk-based, proportionate and targeted approach to regulation and enforcement among the regulators it applies to.

The term ‘regulator’ is clearly defined in the code as any organisation that exercises a regulatory function.

Strangely, this does not apply in Wales, Scotland, and Northern Ireland!

A regulator is not bound to follow a provision of the Code if they properly conclude that the provision is either not relevant or is outweighed by another relevant consideration. But that does not mean that if it does not like one provision it can ignore all of them!

Importantly, the Code does not relieve regulated entities of their responsibility to comply with their obligations under the law.

The code is based on the Hampton Principles and states regulatory activities should be carried out in a way which is transparent, accountable, consistent and proportionate; and that regulatory activities should be targeted only at cases in which action is needed.

The following are among its stated aims and intentions consideration:

• To act as an enabler to economic activity.
• To consider the impact that their regulatory interventions may have on economic progress, including the costs, effectiveness and perceptions of fairness of regulation.
• They should ensure that any decision to depart from any provision of the Code is properly reasoned and based on material evidence.
• Where there are no such relevant considerations, regulators should follow the Code.
• They should only adopt a particular approach if the benefits justify the costs and it entails the minimum burden compatible with achieving their objectives.
• Regulators should seek to reward good levels of compliance by way of lighter inspections and reporting requirements where risk assessment justifies this.
• They should also take account of the circumstances of small businesses, including any difficulties they may have in achieving compliance.

The Regulators Code of 2007 continues to be to be overlooked by the FSA. It spells out clearly what it is not being applied to the thinking of the FSA in establishing the framework for the RDR and no doubt the FCA’s future remit and obligations under this code.

Why?

Has the FSA concluded that the concerns of so many, including MPs, in regard to the RDR are not relevant or are totally outweighed by other relevant considerations?

Perhaps this an opportune moment for Andrew Tyrie to suggest that if the FSA cannot submit to Parliament because of FSMA 2000, perhaps they can be brought under some control by The Regulators Code.

After all, the FSA expect you to adhere to a myriad of codes and rules, a little something in return would not go amiss?

Finally, it seems that Trouble in Shangri-La could be about to return. We reported on this back in March 2010 and it seems that a year later, and post the MPs expenses scandal, that it is ‘business as usual’ at that just soooooo unaccountable FSA.

With that thought of codes, rules, accountability and guidelines I was amazed to see that nothing has been learned on FSA expenses. Citywire has obtained under an FOI request details of the latest huge expenses incurred by Messrs Sants, Turner and others.

They report “FSA chairman Adair Turner topped the bill with a �£42,479 expenses claim, including a �£5,147 roundtrip from London to Toronto and a stay at a �£400-per-night hotel in Seoul, South Korea.

FSA chief executive Sants claimed for �£23,516 of expenses over the year, including a �£506.93 bill for transfers from his hotel in New York to meetings and JFK Airport plus a �£230-per-night hotel in New York. 

Interim conduct managing director Margaret Cole spent �£6,293 in her four months on the FSA board including a �£4,550 flight from London to Hong Kong and Beijing while also incurring a �£10 charge for ‘television and tax’ on a trip to Washington, DC”.

I hope this was not for a ‘Blue movie’ as we would not like to see a scandal over regulatory fees funding that would we?

I can see another FOI request about to go in the post.

RDR, Panacea Comment