FCA labelled ‘in competition with networks’

FCA labelled ‘in competition with networks’

The Financial Conduct Authority is competing against networks in their oversight of small IFA firms, according to the chairman of support services business IFA Compliance.

Charlie Palmer said the FCA would rather take on the compliance responsibilities of a network itself.

He said this was evidenced by the regulator’s request for suitability reports from 700 advice firms so they could be reviewed - including some of the client firms of IFA Compliance.

Article continues after advert

Mr Palmer said: “They are going to feed back on that when they get the files. The network sector barely exists and the feeling is [the FCA] want to do it themselves. They see networks as the competition, which is crazy.

“Several of our clients have had their files checked. They will not feedback the results until the end of the year.

“They normally ask for one file but from fairly big firms it might be 10 or 15. There is no particular skew that I can figure out - for one of them it is just a file for a £10 a month premium.”

In April the FCA confirmed to FTAdviser it has asked a sample of firms for an ‘advice register’, meaning a record of all personal recommendations made between 1 January 2015 and 31 December 2015.

Firms were to provide the information by 3 May this year, and the FCA will use the data to decide which files the firms will have to provide for suitability checks.

In December Mr Palmer was banned and fined nearly £87,000 by the FCA for failing to ensure the risk management framework of his former business, Standard Financial Group, was adequate.

He is currently battling the FCA through the courts to have this overturned and maintains he did not break any rules or guidance.

Mr Palmer said his business was effectively run like a franchise in which the businesses were “watched like a hawk”.

But he said the FCA “smashed the franchise” and most of the firms in his company went directly authorised.

The regulator’s case against Mr Palmer is that the business model he developed gave appointed representatives and regulated advisers a high level of flexibility and freedom as to how they could operate within the network.

This business model, the FCA claimed, thereby increased the risk to underlying customers and increased the possibility that Mr Palmer’s company would be unaware of, or unable to prevent, ARs and RIs giving unsuitable advice or selling unsuitable investments.