Saturday, November 15, 2008

FSA and the Limitation Act 1980, as amended

I understand the FSA is unlikely to change its policy with regard to the 15-year long stop. Apparently it says it has "not been able to find the case" where the benefits to advisers of a time limit outweigh the disadvantages to consumers.

When legislators produced the Limitation Act 1980 and judges acted upon it, they sought to balance the effect on both parties to any action and came up with a 15-year period which, whilst giving protection to a litigant, also provided for the defendant not to be put into the position of defending 'stale claims' without access to the evidence.

This is what the FSA are deliberating on and they appear to be reaching a difference conclusion to that reached by parliament and the judiciary with regard to limitation. The fact that there is no mention of the 15 year limitation in the FSMA 2000 is no defence because that legislation has not replaced any passed previously that the financial services wishes to use as a legitimate legal defence. How can their opinion override existing legislation which was passed by an elected parliament?

If they are acting as a consumer body then they cannot be allowed to make such judgements as they are by definition putting the interest of one group above that of another and then allowing an arbitrary Ombudsman to conjure up a reason to uphold a complaint which would not succeed in a court of law.

The law and natural justice requires balance and provides for it, outside financial services, and that is what we want from the FSA, if however the FSA are still unwilling to allow a 15 year long stop the they should impose restrictions on the FOS which will find against an adviser who has no file despite the fact that the claimant cannot supply documentary evidence to prove that he/she was misled by some sort of implication that a long term contract might be guaranteed in some way.

For stale claims the FOS should place the burden of proof on the complainant and if no documentary evidence is produced, for example a written promise that a mortgage endowment would repay the loan then the case should be dismissed without any investigation or resulting fee.

When I asked David Kenmir if the FSA could override statute he was very quick to put it in writing that it couldn't and neither could anyone else, or any other body, that means the regulators and the Ombudsman cannot ignore the 15 year long-stop, however, we would be happy to come to an arrangement where the complainant's evidence makes it clear that there should be no time limit because the firm has made a contractual warranty.

Until this is resolved we will continue to have this heated debate about something which is patently unjust and damages the advice sector without any fair and reasonable benefit for consumers.

Wednesday, November 12, 2008

Advice sector needs more work on TCF ??

The regulators must be having a laugh!

The FSA has allowed 11, 12, 19 or 33 (FSA doesn't don't know how many!) companies to mislead policyholders and IFAs for two decades yet fights to defend them tooth and nail, it has now appealed to the High Court against a perfectly reasonable Information Tribunal ruling that said life offices' human rights were not being infringed. What about the human rights of retired IFAs? What about the human rights of all those misled policyholders?

TCF should be applied to this LAUTRO shambles instead of brushing it under the carpet.

Wednesday, November 5, 2008

GABRIEL - FSA financial reporting

Open letter to Hector Sants

Why has the FSA forced the IFA community to act as Beta testers for a piece of software that is, at this moment in time, not fit for purpose?

If sufficient testing was done then the testers have been negligent. If it was not done then the individual(s) who authorised the launch have been negligent. Who is responsible and why, until the system is working, have they simply not reverted to using the previous system?

Surely, as a test, data could have been transferred from one system to another.

The use of computerised data input is supposed to save time on both sides i.e. the FSA and the adviser community. The waste of adviser time does not appear to have been factored in and no one is taking responsibility. No explanation is being given and no time scale for when the system will be up to speed.

Is it a software problem or a hardware problem? 'Due to a high level of demand' is given as the reason. If this is indeed the correct explanation. Who is responsible for this poor forecasting of demand?

Evan Owen
IFA Defence Union

How does the introduction of GABRIEL comply with section 7 of the Statutory Code of Practice for Regulators.

7. Information requirements

Hampton Principle: Businesses should not have to give unnecessary information or give the same piece of information twice.
Effective regulatory work, including risk assessment, requires accurate information. However, there are costs to its collection both to the regulator
and to regulated entities. It is important to balance the need for information with the burdens that entails for regulated entities. As such, regulators must
have regard to the following provisions when determining general policies or principles or when setting standards or giving general guidance on data
requirements.

7.1 When determining which data they may require, regulators should undertake an analysis of the costs and benefits of data requests to regulated entities. Regulators
should give explicit consideration to reducing costs to regulated entities through:

• varying data requests according to risk, as set out in paragraph 4.3;
• limiting collection to specific regulated entities sectors/sub-sectors;
• reducing the frequency of data collection;
• obtaining data from other sources;
• allowing electronic submission; and
• requesting only data which is justified by risk assessment.

7.2 If two or more regulators require the same information from the same regulated entities, they should share data to avoid duplication of collection where this is
practicable, beneficial and cost effective. Regulators should note the content of the Information Commissioner’s letter11when applying the Data Protection Act 199812 in
order to avoid unnecessarily restricting the sharing of data.

7.3 Regulators should involve regulated entities in vetting data requirements and form design for clarity and simplification. They should seek to collect data in a way that is
compatible with the processes of regulated entities and those of other regulators who collect similar data.

Monday, November 3, 2008

Banking crisis - questions for the Treasury Select Committee

I wish to submit the following questions:

Do you now agree with an overwhelming majority of people in the financial services industry that the "tripartite agreement" is fundamentally flawed due to conflicts of interest?

Do you now agree that banking supervision is something one state body should have full responsibility for and that it should be the role of the Bank of England and its former staff who are now at the FSA?

Given the risks that banks pose to the financial system was there ever a time when you felt the need to 'supervise' them very closely rather than regulate certain activities and allow other, more dangerous, unregulated activities to be carried out in London, the largest financial centre on Earth?

Did any of you understand the business model of Northern Rock?

Did anyone not think that lending 125% of the value of a home was irresponsible?

Did you really learn some lessons from Northern Rock and if so why weren't they applied immediately?

Did John Tiner foresee any of this and why isn't he being questioned along with Howard Davies in the same manner as Alan Greenspan was in the US?

Why are the bank auditors not being questioned about the accounts supplied to the FSA?

Why were Bradford and Bingley shareholders misled, or coerced, into subscribing to the rights issue when there was a high probability it would be nationalised?

Why was the RBS rights issue allowed to go ahead and cause unnecessary losses for shareholders?

What hope is there for shareholders to subscribe to rights issues in future given that the facts are not available and neither are dividends?

Why were golden parachutes and pensions handed to FSA staff who left, and are leaving, as this was unfolding while they criticised banks for similar practices?

Does the FSA think it has achieved the Statutory Objective of "maintaining confidence in the financial system"?

Has the FSA been so busy with intangibles such as the Retail Distribution Review and Treating Customers Fairly initiatives that it missed the bigger picture?

Does the FSA now recognise that small advisers are not a threat to the financial system and that it should foster a new, open and transparent, relationship with the distribution model which generates the lowest proportion of complaints yet pays the highest proportion of FSA fees and is burdened by an unwarranted level of regulatory burdens by ratio of size?

Why does Barclays have six months to comply with the Financial Services Authority’s (FSA) new capital ratio target, but not Lloyds TSB ?

How did the FSA arrive at its new capital ratio targets for the banks?

Were the new capital requirements calculated according to transparent principles and can we know what they are?

Why do Ministers believe that a bank is able to sustainably borrow at 12% yet lend at much lower rates?

Is it right that small savers both directly through shareholdings and indirectly through pensions and savings should lose out on dividend income because of the onerous lending terms?

Who has been 'leaking' so much detail to Robert Peston of the BBC?

We are expecting a public inquiry into the involvement of the Bank of England, the FSA and HM Treasury in all of this, will Ministers demand one?