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FCA to publish revised adviser cap ad rules in ‘early 2015’

Advisers will find out the amount of cash they have to hold to meet new regulatory capital adequacy requirements at the beginning of next year as the FCA publishes the outcome of a promised review, according to the Association of Professional Advisers.

Apfa told FTAdviser a shake-up of capital adequacy rules for financial advisers will go ahead early in 2015, confirming how much advisers will have to need to hold stay in business, after a four-year delay.

Chris Hannant, Apfa director general, said: “The proposed increases were due to start to come into effect from the end of 2015, and although I expect some form of increase to come, it may well be calculated on a different basis.

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“This represents an opportunity to simplify the interaction with PI excesses and provide greater flexibility for firms about the use of the capital they hold.”

A spokesman for the regulator was unable to confirm when new rules would be published, but indicated it was likely to be after January.

In September 2013, the FCA revealed it was pushing back the date for the first stage of the new capital requirements, for the second time and by two years to 31 December 2015. This would require firms to hold the greater of either one month of fixed costs or £15,000 in reserve.

The second phase, which will require firms to hold the greater of three months of fixed costs or £20,000, will also be pushed back by two years to 31 December 2017.

However, with just three months to go before that deadline, the FCA said it was not sure that the approach in principle “remains the most appropriate” nor that it is “consistent” with its competition objective.

The FCA said at the time: “Since the original deferral, a series of developments has led us to question whether this approach remains the most appropriate.

“In particular, many firms are still implementing changes to their business models as a result of the Retail Distribution Review... Also the FCA has a competition objective that was not present under the FSA.

“In their current format, we believe these rules would not necessarily be consistent with that objective. Therefore we have decided to defer implementation of these rules for a further two years to allow a more fundamental review of our proposed approach.”

Previously Foster Denovo chief executive Roger Brosch told FTAdviser the capital requirements as they stood would spell the end of small advice firms, as they would be forced to merge or consolidate.

emma.hughes@ft.com