The Financial Services Authority dispatched an angry letter to the chief executives of Britain's banks, building societies and financial advisers yesterday, after discovering that less than two-thirds of firms giving advice have been complying with new rules introduced last summer.
After sending mystery shoppers to 130 financial services companies towards the end of last year, the regulator discovered that only 58 per cent of firms which give financial advice were correctly disclosing their commissions and providing the right documentation to their clients.
The FSA introduced new rules regarding financial advice last June, including the requirement to issue all customers with "keyfacts'' documents which clearly explain the fees or commissions they are being charged, as well as their alternative options.
In the letter to chief executives, Clive Briault, the managing director of retails markets for the regulator, said the FSA was following up its mystery shopping exercise, and would be disciplining some firms as a result. He said: "FSA rules are not optional and these results are very disappointing. These firms are not new to regulation and senior management should be well aware of their responsibilities for compliance with our rules."
John Howard, the chairman of the Financial Services Consumer Panel, seized on the results yesterday , saying they highlighted the inadequacies in the current regulatory system.
"We have always been of the view that the FSA cannot rely on returns from firms and occasional inspection visits to regulate successfully," he said. "Mystery shopping enables the FSA to see exactly what customers are experiencing and so far it has not been a pretty sight."Reuse content