164/99
13 October 1999
FINANCIAL REGULATION OF PROFESSIONALS LIGHT TOUCH WHERE POSSIBLE, PROTECTION WHERE NECESSARY
Accountants, solicitors and other professionals will not need to be regulated by the Financial Services Authority (FSA) for financial services when they are not carrying on mainstream financial business, under proposals announced by Economic Secretary Melanie Johnson today.
There will be full FSA regulation of those professional firms doing mainstream financial services business as for other financial services firms. There will be indirect oversight by the FSA of other financial services activities carried on in the course of the legal, accountancy or actuarial profession, such as the execution of clients' instructions in the purchase or sale of a company, or in dealing with settlements arising from the execution of wills or divorce proceedings.
Announcing the proposals following a meeting with the presidents of the Recognised Professional Bodies (RPBs) and FSA Chairman Howard Davies, Miss Johnson said:
"These arrangements reflect our approach to modernising financial services regulation: a light touch where possible, with consumer protection where necessary.
"Where members of the professions are engaged in mainstream financial services business, such as arranging life insurance and personal pensions or managing investment portfolios, their clients need the same protection as other consumers. We will ensure that they get it.back to top
"The current system of self-regulation does not meet this need properly. In future, professionals doing mainstream business - currently thought to number about 2,000 - will be authorised and regulated by the FSA.
"At the same time we have listened carefully to concerns expressed in consultation about the costs of "precautionary authorisation" and about dual regulation of those who provide financial advice only as part of professional services they are providing to a client. We are keen to get the balance between effective consumer protection and the level of regulation absolutely right.
"We therefore intend that these activities should generally be regulated as part of the conduct of the profession by the relevant professional body, subject to the regulatory arrangements being made very clear to their clients."The arrangements for non-mainstream regulation will be kept under review to ensure that the public gets a fair deal. The FSA will be given a statutory duty under the Financial Services and Markets Bill to keep developments under review and powers to extend direct regulation where necessary to protect consumers. They will need to pay particular attention to the adequacy of arrangements for dealing with complaints and consumer redress."
Key features of the arrangements are expected to be:
*exclusion from the scope of the Bill for regulated activities carried on by solicitors, accountants and actuaries which meet specific criteria. The intention is that :
- the activity should be ancillary and subordinate to professional services provided to the client;
- the firm should not receive any benefit as a result of the activity other than from the client; and
- and that marketing sensitive products, like life insurance, is not involved.
*a general duty on the FSA to keep under review the financial services activities of excluded professionals, on which they will report in their annual report to Parliament.
*FSA reserve powers to ban members of the professions from carrying out a particular activity
*FSA authorisation for particular activities in the interests of consumers.
NOTES FOR EDITORS
The new regime is expected to be implemented in amendments to the Financial Services and Markets Bill, currently before Parliament and in secondary legislation to be made under it.
A consultation paper on the scope of the activities to be regulated under the Financial Services and Markets Bill including a draft Regulated Activities Order was published by the Treasury in February 1999 (HMT press release 34/99).
Media enquiries should be addressed to Charles Keseru or Deborah Done at the Treasury press office on 0207 270 5188 and 0207 270 5222 respectively.