Source · Select Committees · Public Accounts Committee
Recommendation 10
10
Acknowledged
In response to the BSPS case, the FCA had to gather further evidence to understand...
Conclusion
In response to the BSPS case, the FCA had to gather further evidence to understand the scale of the problem and in June 2018, out of a sample of 192 files, it found that 47% of transfer recommendations were unsuitable.25 In order to take action against regulatory non-compliance, the FCA is required to collect high levels of evidence of wrong-doing and this led to significant delays in its use of regulatory powers.26 For example, in its inquiry into the BSPS case, the Work and Pensions Select committee identified contingent charging as “a key driver of poor advice”.27 However, rather than taking immediate action, the FCA took 32 months to ban the charging structure.28 It delayed making changes to contingent charging rules as it was not convinced by the alternative charging models.29 It told us that, to justify the use of its regulatory powers it had to seek further evidence and had held a consultation to understand the wider impacts on consumers and the market.30 Similarly, five years after the BSPS case the FCA has implemented emergency asset retention powers to ensure firms are able to pay compensation to members, however Clarke Willmott described the FCA’s use of powers as woefully late.31 By contrast, the FCA has proved it can respond quickly in other circumstances. For example, it took swift emergency action in response to the immediate harm posed during COVID-19.32 It is unclear which metrics the FCA use to assess whether measures can be established instantly or whether they require consultation.
Government Response Summary
The FCA provided a high-level update on enforcement activity related to BSPS, stating it is a high priority and investigations are at an advanced stage.
Government Response
Acknowledged
HM Government
Acknowledged
The FCA is able to provide a high-level update on enforcement activity as set out below. 3.2 Enforcement activity related to BSPS is a high priority for the FCA. The FCA currently has c.30 ongoing investigations into firms and individuals relating wholly or partly to BSPS advice. Those investigations are at an advanced stage and five of them have entered either Stage 1 settlement discussions (i.e. a 28 day period within which the subject may agree to the FCA’s findings to resolve matters) or the Regulatory Decisions Committee (i.e. a Committee of the FCA Board which takes contested enforcement decisions on behalf of the FCA and operates separately from the rest of the organisation). If a matter is resolved in Stage 1, the FCA can proceed to publish information about it. If, following Stage 1, the subject contests the matter it moves into the Regulatory Decisions Committee or Upper Tribunal process. The timing of those processes is determined by those respective bodies.