How the FSMA will impact on retail financial services
| DOI | https://doi.org/10.1108/eb025055 |
| Published date | 01 April 2000 |
| Date | 01 April 2000 |
| Pages | 344-348 |
| Author | Simon Morris |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 8 Number 4
How the FSMA will impact on retail financial
services
Simon Morris
Received: 8th August, 2000
Cameron McKenna, Mitre House, 160 Aldersgate Street, London EC1 4DD; tel: +
44
(0)20 7367 3000;
fax: +44 (0)20 7367 2000; e-mail: simon.morris@cmck.com
Simon Morris is a partner in CMS
Cameron McKenna's Financial Services
Group, having joined the firm in 1980. He
carries out a wide range of commercial
and regulatory work for retail and whole-
sale financial institutions. He is the author
of 'Financial services — regulating invest-
ment business' and was one of the
advi-
sers to HM Opposition on the Financial
Services and Markets
Bill.
ABSTRACT
The Financial Services and Markets Act
UK financial services industry, but it is sug-
gested that it will make relatively few changes
in relation to retail financial services. The new
regime will regulate some additional retail
investments, and it is possible that the design of
polarisation will be
altered.
The greatest
impact, however, is likely to result from the
FSA's emphasis on senior management respon-
sibility, whereby firms' senior management will
be held personally liable if
the
firm fails to dis-
charge the key retail duties such as know your
customer and
giving suitable advice.
INTRODUCTION
The impact of the Financial Services Act
1986 (FSAct) is still resonating throughout
the retail financial services industry. The
introduction of polarisation, the rule that
life assurance, unit trusts and OEICs (pack-
aged products) are sold by clearly distinct
product providers or independent financial
advisers (IFAs), the need to give suitable
advice at point of sale and the regime call-
ing for a trained and competent sales force
continue to raise problems of practical
application over 12 years later.
The requirement for retail firms to
reopen many hundreds of thousands of
personal pension sales and to compensate
thousands of investors, a process which
began in 1995 and is still going on,
together with fresh concern over endow-
ment and FSAVC sales, emphasises the gulf
between regulatory demands and actual
compliance. It also, perhaps, highlights the
continuing gap between what industry
does,
and what the regulator actually
understands.
There has certainly been a significant
increase in the standards of retail sales over
the past few years, and only a few firms
fall sufficiently below the norm to justify
disciplinary action. Nonetheless, the
ongoing disciplinary cases against well
known product providers and IFAs under-
line the fact that there is still widespread
and significant non-compliance with the
key retail regulatory objective of ensuring
suitable advice at point of sale.
Against this background this paper now
examines the likely impact of the FSMA
on retail financial services, looking in turn
Journal of Financial Regulation
and Compliance, Vol. 8, No. 4,
2000,
pp. 344-348
© Henry Stewart Publications,
1358-1988
Page 344
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