FSA must be ‘flexible’ to advisers’ RDR needs, Tyrie
TSC tells regulator to “redouble” its efforts to inform the public of changes and to increase the levels of industry compliance.
The Financial Services Authority has told the Treasury Select Committee that firms can apply for an extension to the RDR deadline and a waiver can be applied if the adviser, his spouse or child is in ill-health or if there is a spousal bereavement, following the TSC’s request that the regulator be accommodating of advisers’ needs.
In an exchange of letters published today (7 September) between Martin Wheatley, managing director of the FSA, and Andrew Tyrie, TSC chairman, Mr Wheatley said the regulator is “committed to the RDR timetable” but it will be “proportionate” in its approach to supervision.
Mr Tyrie’s letter says the committee still recieves correspondance from concerned advisers regarding the cliff-edge and that he would like further information on the FSA’s waivers of the qualification requirements and a work-based assessment system.
Mr Wheatley’s letter, dated 3 August, reinterates that firms can apply for a deadline extension through its waiver process but emphasises firms will only be granted a waiver if they pass the statutory test requiring the firm to demonstrate that the rule is either unduly burdensome or not fit for purpose and that modifying it does not create an undue risk for consumers. In particular, firms need to provide “robust” evidence setting out the exceptional circumstances that prevent an adviser from completing an appropriate qualification by the end of 2012.
The FSA has received 47 waivers, of which 18 have been granted, 2 have been rejected, 21 have been withdrawn and 6 are under consideration. The letter went on to say that approved applications have generally been on the grounds of ill health of the adviser; a spouse or child that has required the adviser to act as a carer; or spousal bereavement.
Mr Wheatley highlights that there are now four alternative assessments available for individuals who prefer not to sit formal examinations but said that most advisers are opting for the more traditional examinations.
However, Mr Tyrie highlighted in his letter, dated 20 June, that the TSC had previously recommended the cliff-edge nature of the implementation of the RDR be tempered by a one-year delay, a system of proper supervision and a system for providing flexibility, such as grandfathering, to advisers on a case-by-base basis.
The FSA rejected the supervision point and the delay almost immediately, which Hector Sants, former chief executive of the FSA, later apologised for in Parliament.
The letter, dated 20 June, said: “The FSA must remain flexible to their needs, while maintaining the standards required to protect consumers.”
Mr Tyrie said that although the RDR will “radically reform” the provision of financial advice in the UK, its introduction has placed a “heavy burden” on practitioners, “with an attendant risk for consumers”.
He said: “The banning of commission and the introduction of a clear market price will be carefully monitored by the Treasury Committee in an effort to ensure that the expected benefits flow to consumers.
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