David Severn, the former FSA head of retail policy, has slammed the regulators suitability of investment advice guidance, saying it shows disregard for the consultation process.
The regulator published the guidance consultation paper on January 6 which warns about the weaknesses of risk-profiling tools. The consultation closes on January 28.
It cited a review of 366 files previously identified for suitability assessment failings. Over half of the files were deemed to be unsuitable because of a failure to match investment selection with the customer’s attitude to risk.
The FSA said the level of failure was “unacceptable”.
But Severn, who is also a former Aifa director general, criticises the regulator for setting a consultation period of only three weeks. He says: “Allowing three weeks for comment on a document where little was done to bring it to the attention of those affected shows a disregard for proper consultation.”
Severn also argues that expecting firms to take action based on findings from only 366 files is disproportionate. (article continues below)
He says: “The FSA is supposed to take a risk-based approach to supervision. Taking a blunderbuss to all firms does not seem the correct approach.”
Fay Goddard, the chief executive of the Personal Finance Society, says: “It is called a consultation paper but it looks like a fait accompli. There are no consultation questions and the regulator has given respondents three weeks to send in comments.”
Goddard says it is worrying that the guidance paper holds no regulatory status but will still form part of the FSA’s supervisory approach.
An FSA spokeswoman says: “In October, we introduced new procedures which increase transparency around some of our publications, including the ability for the industry to comment. This is different, and in addition, to full consultation papers which typically have a much longer consultation period.
“The report includes general guidance but does not, for example, include proposed changes in rules which would require extensive consideration.”