Opinion 

The FCA giveth and the FCA taketh away

Michael Trudeau

Among the most talked about stories this week was the news, exclusively revealed by FTAdviser yesterday (30 May), that one adviser has secured a 99 per cent discount against a five-figure Keydata legal claim in a rare sign of clemancy from the Financial Services Compensation Scheme.

Scales of justice

Kent-based adviser Financial Escape lived up to its name when it wrangled a discount of more than 99 per cent off a £64,000 Keydata claim.

The Financial Services Compensation Scheme agreed to settle out of court with the firm for just £400 of the larger sum FSCS lawyers were looking to recover. Because the company held only £16,177 capital in reserve, bearing the full brunt of the claim could have blown the company out of the water.

Interestingly, one source told FTAdviser the Financial Conduct Authority may have stepped in to arbitrate and is doing so in similar cases, realising that such actions could result in huge losses - and ultimately bankruptcy - for many small firms.

While many while be happy at a rare showing of mercy and pragmatism, reader comments suggest others feel those that recommended the products should face the full cost in order to prevent others having to pay. That debate will rage.

At the other end of the justice scales, a regulated Edinburgh-based IFA successfully applied to have its permissions cancelled after the then-regulator, the Financial Services Authority, issued a supervisory notice of a decision to remove them following concerns over capital resources.

Failing to prove it held adequate capital reserves and unfortunately including several questionable entries on its balance sheet did the firm no favours, as it failed to convince the FCA it did not have a £22,000 regulatory capital shortfall.

Since its introduction the new regulator has not been as prolific with its stripping of permission from small firms. I wonder if this is an exception to that or if it is a sign of a return to the old ways.

The cost of starting over

In other regulator-related news, a freedom of information request from PanaceaAdviser’s Derek Bradley yielded the interesting if unsurprising news that the FCA had spent more than £1m on its rebrand from the Financial Services Authority.

I have to admit I’m not particularly scandalised by this. The regulator is a huge operation and it was a much more involved process than a simple rebrand. Still, a million quid is a million quid and with the cost of regulation rising it will obviously not go down well with those picking up the tab.

One argument I have heard since is that the regulator really cannot win here: people want more services and cheaper regulation, which one would think contradicted each other. That argument sort of holds, until of course you get a look at the kind of pay the top dogs are pulling in.

Don’t tread on me

In other news, Prudential had a bit of egg on their face this week when an adviser spoke out against the company dragging its feet to back off from one of his clients.

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