Sam Dunn: Hail the advent of zero tolerance in finance
Businesses may carp, but the City regulator is right to get tough on any misdemeanour - no matter how small
Sunday 27 November 2005
Bitch, moan, gripe, grumble.
Half an hour with certain members of the financial services industry, and you'd think they had the hardest jobs in the world. Their beef? The Financial Services Authority (FSA).
The City regulator meddles, pokes about, insists on unnecessary and laborious paperwork, and instils overbearing checks - all at inordinate cost to their livelihoods, they claim.
For sure, plenty of small firms, independent financial advisers (IFAs) among them, are struggling with the costs of regulation - notably, that of insuring themselves against malpractice and mis-selling claims.
But the good that the watchdog does more than outweighs this cost - and I'm a believer that if they play by the rules, any financial firm should be able to ride out the rough times.
I'm no FSA toady, but credit where it's due, and not enough is given to it for looking out for the consumer as it scans the UK's financial services landscape.
Its officials are busy raking across the different sectors of industry, investigating and chasing after bad practice.
It is beginning to ape an approach introduced by former New York mayor Rudy Giuliani in the 1990s: zero tolerance.
Where Mr Giuliani clamped down on routine street crime to spread the message that every sort of offence would be taken seriously, so the FSA's enforcement teams are taking the same approach in financial services.
Rather than just impose huge fines, such as the £800,000 levied on Abbey in May for mishand- ling mortgage endowment complaints, it is busy with lots of low-level activity to clear away the practices that distort consumers' ability to make fair judge- ments about financial products.
In the past five weeks, highlights have included tightening controls on venture capital trust marketing; insisting on clearer information in customer insurance documents; deepening its inquiry into payment protection cover; and fining IFA Kings £60,000 for approving misleading financial promotions.
These come on top of more high-profile activities in October, including the launch of a website called mortgageslaidbare.co.uk, which tries to demystify home loans and the fees that can make it difficult to tell a good deal from a bad one.
All this good work has inevitably made it some enemies. Indeed, its mortgage website has attracted snivelling comments from some brokers, who are clearly annoyed by its efforts to help consumers.
Earlier this year, when it faltered in its pursuit of Legal & General for endowment mortgage mis-selling - a £1.1m fine it levied was halved after a tribunal review - the crowing in many parts of the financial services community was loud enough to make your ears bleed.
The FSA is in a difficult position: its statutory tasks involve the maintenance of market confidence as well as consumer protection - and sometimes these two can grate. This guarantees criticism from all quarters, including consumer groups that often claim the regulator pulls its punches and doesn't go far enough to protect customers.
Not that the brickbats appear to have put the FSA off, and good job too.
It's no secret that the financial services industry is still stuffed with modern-day mountebanks and charlatans preying on consumers' ignorance to make a quick sale and pocket profit and commission.
Any organisation that aims to turn individuals into knowledgeable financial consumers, who can engage on equal terms with the salesmen, is to be welcomed - whatever its faults.
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