Retrospective enforcement is a matter of ‘perception’: FCA
The FCA has concluded that concerns surrounding retrospective regulation amount to perception rather than reality.
After asking firms to submit examples of where the City watchdog has acted retrospectively the FCA concluded that such a perception is caused by its handling of a number of “legacy issues”.
A number of the examples given related to PPI mis-selling, Arch Cru and interest rate hedging products.
In its review of the submissions the FCA admitted this represented a challenge.
It said: “Sometimes, the fact that there has been a problem with advice or selling practices may not become clear until some time after the event and it is only at that point that action can be taken.
“That may require a review of past business.
“While we do not believe that this is an example of retrospection, as we have defined it, we do appreciate the concerns of industry and the challenge that past business reviews pose for them.”
One of the most frequently raised issues were Financial Ombudsman Service assurances, which the FCA moved to defend, that firms had nothing to fear if they stayed within the rules.
Despite not having found any examples of retrospective regulation, the FCA said the submissions did raise some issues it would look into, and was already acting on some of these.
In its review the FCA said: “We also recognise that reactive regulation and belated intervention will give rise to perceptions of retrospective action and hindsight bias, which is clearly undesirable.
“It is our intention that the FCA will become a more forward-looking regulator.”
In a regulation round-up last August, the FCA asked firms and their representatives to send any examples of where they believed it or its predecessor the FSA had applied rules retrospectively.
Last month FCA chief executive Martin Wheatley claimed retrospective enforcement is necessary to deliver justice and create a template for others to follow.
| FCA: Areas for consideration |
FCA will look at the need to improve communication with firms The fact that fast-changing technology may make some rules inappropriate The need to intervene at an earlier stage |
Adviser view
Simon Webster, managing director of Kent-based Facts and Figures Financial Planning, said: “It may not be the case that the FCA does retrospective regulation but Fos does and it remains an issue for all financial advisers.
“There are a lot of rumours circulating about what the regulator may or may not have done and the problem for advisers is discerning what is the truth and what is urban myth.”
