The IMA has warned that proposals for the FSCS in the Financial services bill could mean different rules for those overseen by the two different regulators.
The Investment Management Association has warned that proposals for the Financial Service Compensation Scheme, outlined in the draft Financial Services Bill, could mean different rules for those overseen by the two different regulators.
The Financial Services Authority, which currently sets the rules for the FSCS, is set to be replaced with two new regulators: the Financial Conduct Authority and the Prudential Regulation Authority. The new bill splits rule making authority for the FSCS between these two parties. The Treasury will set the specific cases under which each of the new authorities can make rules, and they must always consult one another before introducing new rules. The IMA points out that this new structure could mean a splitting of the FSCS resulting in two different sets of rules.
It says: “We are unconvinced that the high level cooperation duties will be sufficient to ensure a joined up set of rules. We fear that regulators making different rules about different parts of the scheme could result in a de facto separation into two schemes, one for PRA firms and one for FCA firms.”
Further criticisms raised by the IMA are that the bill is unclear on how the responsibility for rule making will be divided between the two new authorities, and that it does not outline a process for resolving differences of opinion. It recommends that all rules relating to the FSCS should be made by the Treasury.
The IMA also warns that the two bodies being introduced should be accountable for how well they undertake their duties, with any complaints being handled by an independently appointed complaints commissioner.
The bill gives the FCA a secondary duty to promote competition. The IMA agrees with this and proposes furthering it, to ensure that the UK does not suffer any competitive disadvantage relative to other countries.