The Institute emphasises the need for direct regulation of individuals dealing with customers.
The FSA proposals, part of a Consultation Paper containing changes to the FSA Handbook, argued for the abolition of customer controlled functions where individuals are dealing with wholesale (i.e.non-private) customers.In addition, the FSA suggested that such functions might be removed in the case of individuals dealing with retail customers.
Thecustomer controlled functions ensure that firms, before appointing someone to carry out certain defined functions in relation tocustomers, must clear the appointment with the FSA. A further consequence is that the FSA maintain a public register of such individuals.
The CII argues that the standing of all individuals dealing with customers, including their level of qualification, should be a responsibility of regulation, not only of senior management in authorised firms.
In the case of non-private customers, the CII is concerned that their decisions may affect consumers further down the line, such as the members of pension schemes or collective investment schemes.
In the case of retail customers, poor product design, mis-marketing and mis-selling have been largely a result of inadequate knowledge. Theeffect of a reduction in the level of protection would be to imposeadditional cost on enforcement and complaints handling, withconsequent effects on the FOS and the FSCS.
The CII’s position is that customers have a right to expect the individual dealing with them to be properly qualified.The FSA, as part of itsregulatory responsibility, should regulate individuals dealing with customers and ensure that they have the right level of qualification.
CII Director General Sandy Scott said: ‘Professional standards are the key toclosing the protection, savings and pension gaps. In the long run professional standards will decrease costs associated with market failure, improve the quality of market practice and increase the competitiveness of the UK financial services industry. We believe that reduction in regulatory standards to achieve short term cost savings is a false economy. The FSA should think again’.
