Regulation  

FCA fines are ‘destroying’ trust in sector

In a five-page thinkpiece for the Chartered Insurance Institute the director of regulatory consulting for public relations firm Lansons wrote that a “febrile” political environment could be preventing the regulator from proposing a more moderate approach.

He compared the regulator’s attitude to that of a harsh parent who could end up producing a “troubled adolescent” through constant punishment.

Mr Hobbs said: “The FCA could ask itself whether ever greater fines handed down to firms and individuals doesn’t destroy consumers’ confidence in financial services rather than raise it.

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“If the regulator attempted a ‘new deal’ it would be panned when the next scandal occurred.”

Mr Hobbs, the former head of life and pensions for the Association of British Insurers, said that the FCA might be accused by politicians of “cosying up” to the industry if the relationship between both parties became more “grown-up”.

He added: “A council of elders approach could have forewarned the former FSA of the PPI mis-selling scandal. The retail distribution review, which took six years to complete, might have used expert groups for more than just six weeks of those six years.

“The practitioner panel might be used in a more informal way. But all these risk the cosying up accusation.”

BACKGROUND

Last month the FCA issued a record fine of almost £1m for a retail sole trader, Birmingham-based Gurpreet Singh Chadda, over his failings when conducting sale and rent-back agreements. However, the former City regulator, the FSA, reduced 10 fines for individuals on the basis of financial hardship last year, while the FCA has so far redacted three fines due to claims of financial difficulty since it began in April.

Comment

Laura Chappell, head of London-based broking for regulatory consultancy Bovill, said: “The regulator’s proposals over capital adequacy at smaller firms could affect the size of fines it levies in the future. But there could be a large backlash from the public if all the money left in a company went to the government instead of being paid back to any clients who had been disadvantaged.”