Professional confessional

During the past few months, spurred on by strong vested interests in the industry, the retail distribution review debate has strayed into the rather abstract area of “professionalism”. This has been defined in terms of specialist knowledge, of codes of conduct and practice, of belonging to professional bodies and of standards boards.

But can professionalism be so easily defined? Does this mean that a person who is excellent at a job is not “professional” because he or she is not a member of some cosy club, or does not adhere to a code of conduct?

The ifs School of Finance accepts that standards boards can be useful, but only if they are truly independent and have statutory teeth. I remain deeply sceptical that codes are anything more than a set of rules for the club that are hardly, if ever, exercised.

In contrast, individuals who are authorised to perform regulated functions are already accountable to the regulator. Where there is transgression, large fines can be levied on individuals, as well as organisations, and practitioners can face the serious sanction of having their authorisation to practise withdrawn.

The FSA takes many enforcement actions resulting in final notices against individuals for breaches of FSA rules. This also focuses on an individual’s unsuitability to act as an ‘approved’ person or within ‘authorised’ activities.

The key aspect is that these notices prevent individuals from carrying on certain activities when it comes to both ‘selling’ or ‘advising’ in the market of financial products. These notices hugely outnumber the actions taken by the various professional bodies active in the sector and also have far more direct consequences in terms of the protection of the consumer because of the regulator’s statutory teeth. In addition – and unlike professional bodies – the FSA has a proactive approach through Arrow visits and other monitoring as well as access to information from the Financial Ombudsman Service.

While there has been much discussion about the regulation of individuals by professional body membership rather than FSA authorisation – a very attractive notion to certain vested interests – little attention appears to have been paid to the fact that this would merely replicate what the FSA can, and already does, do.

The FSA has shown and continues to show on a frequent basis that it has the power and appetite to regulate the conduct of individuals and take action where people fall short of the expected standards. Even for an irregular visitor, the FSA’s website is testimony to this.

Against such a background, the ifs School of Finance is strongly supportive of preserving the central role of the FSA in enforcement and policing the market.

Doing so recognises that the FSA has authorisation powers, investigatory mechanisms and enforcement processes already in place. Nothing that we or any other non-statutory body can do, either alone or combined, can get anywhere near this level of authority and sanction.