With the regulator’s findings of small firms indicating continued failings within the quality of advice given and record-keeping, Dominic Clark, manager of the small firms division at the FSA, indicated that affordability issues and debt would have to be addressed.
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He explained: “While small firms on their own do not pose much of a risk, as a collective the FSA has to tackle the generic risks associated with them. Our findings showed that three-quarters of smaller advisory firms did not have robust enough practices in place for giving advice, and recording it.
He added: “There are cracks starting to appear in the systems and controls that lead to advice.”
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However, an intermediary, who wished to remain anonymous, questioned the regulator’s drive to implement principles-based regulation following the findings.
He said: “Will the move to a principles-based approach to regulation help smaller firms, as the results of the FSA’s recent review into their practices seem to suggest that small firms need more prescriptive rulings.”
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However, Clark reiterated that principles-based regulation had always existed but the time was right for the transition.
He added: “I understand the argument for rules, but they haven’t stopped previous mis-selling scandals in other areas.”
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