This is the main finding of the FSA Smaller Businesses Practitioner Panel’s Annual Report for 2007/8. As a part of the regulatory accountability framework, the Panel represents the interests and views of smaller financial services firms - which comprise around 90% of those firms regulated by the FSA.
Mark Rothery, outgoing Chairman, said: "The Panel's Annual Report is produced at a time when many developments are having a huge impact upon the operation of a smaller firm in the Financial Services Authority's regulatory environment.
"Smaller firms can offer their customers a unique proposition. It is therefore essential that the FSA strives to strike the right balance between strong, effective and - importantly - proportionate regulation on the one hand; whilst enabling conscientious and well managed smaller firms to thrive and prosper on the other.”
The Panel has been supportive of more principles-based regulation (MPBR) and has engaged in regular dialogue with the FSA on this issue. However, some smaller firms still tend to prefer the certainty provided by prescriptive rules. So, although many strive to adapt to a more principles-based approach, the Panel continues to stress the need for the FSA to provide better support for and information to those smaller firms that are finding it harder to do so.
The Panel has also been supportive of the FSA’s commitment to upgrade the structure and quality of the Firm Contact Centre (FCC) as, for many smaller firms, this is their first point of contact at the FSA.
The Retail Distribution Review (RDR) is an extensive piece of work and the Panel appreciates the FSA’s decision to look at the distribution framework. However, there are aspects which continue to cause the Panel concern – not least its potential impact on the IFA sector, according to the report. The Panel welcomed the FSA’s decision to delay the next formal stage of the RDR until October 2008, to allow time for careful and critical deliberation, and looks forward to playing an integral part in assisting the FSA in reaching some firmer policy conclusions leading up to this date. In any event, clarity of communication and open engagement with smaller firms continues to be imperative.
The FSA’s report against the 31 March 2008 TCF deadline – expected shortly – is awaited with interest by the Panel.
