[A-List] UK legitimation crisis: investor stupidity

["Michael Keaney" <michael.keaney@xxxxxx>]

City body attacks Financial Services Authority
By William Kay, Personal Finance Editor
The Independent
24 February 2003

The Financial Services Practitioner Panel, one of the most powerful voices
in the City, today launches a wide-ranging attack on the regulatory record
of the Financial Services Authority and says that mis-selling campaigns must
be matched by warnings that investors must learn to take care of themselves.

In the Panel's annual report the chairman, Donald Brydon, who is also
chairman of Axa Investment Managers, says: "The Financial Services and
Markets Act 2000 states that the FSA must have regard to 'the general
principle that consumers should take responsibility for their actions'. The
Panel has the sense that in the FSA's work in the consumer field the FSA
takes this aspect of the Act insufficiently into account in determining its
actions. The Panel hopes that in 2003 it will see increasing reference from
the FSA to the need for consumers to take responsible actions in their
financial decision making alongside those advocating better selling
practices from practitioners."

The Panel was set up under the law to give the FSA practitioners' views of
regulation, and it includes Jonathan Bloomer, chief executive of Prudential,
the HBOS chief executive James Crosby, Clara Furse, chief executive of the
London Stock Exchange, Brendan Nelson, financial chairman of the accountants
KPMG and Hector Sants, vice-chairman of Credit Suisse First Boston.

In his statement accompanying the report Mr Brydon takes the FSA to task for
piling on the regulatory burden. He says: "The Panel has been concerned
about the number of proposals that continue to emerge from the FSA. To date
there is no clear mechanism for considering the total effect of the
regulatory burden carried by the regulated firms. All concerned need to
remain vigilant that, in developing regulation, a point of no return is
avoided where innovation, flexibility and competition are threatened by too
much cost and complexity. The number of different regulatory and exploratory
reviews continued in 2002 to cause anxiety and overload."

In listing key issues that are worrying his members, Mr Brydon goes on to
warn that the FSA is going beyond what is strictly necessary. He says:
"There have been some matters where the Panel has questioned why early
implementation is necessary. Firms already have to cope with implementing a
wide range of new or changed regulatory requirements, and with understanding
the new rules and guidance. The Panel is anxious that 'must-dos' take
precedence over 'nice-to-dos'."

Among the "nice-to-dos", Mr Brydon cites the proposals to tighten up
point-of-sale disclosure of information for retail packaged products. He
also accuses the FSA of failing to discriminate between different types of
insurance companies in the current tense climate over the stock market.

"Regulatory issues in the insurance sector, for obvious reasons, have had a
high profile during the year," Mr Brydon says. "It is important that clear
distinctions are drawn between issues in the life and general insurance
industries and between poorly managed and well managed firms. Great care
needs to be taken to avoid unnecessary additional impact on consumer
confidence at a time of stock market fragility."