The Financial Services Authority has had to increase its budget for the coming financial year by 13 per cent to £240m as it gears up to take on the regulation of an additional 20,000 companies and fund the costs of its investigation into the scandal over split-capital trusts.
Mortgage and insurance brokers are due to come under the FSA's control during 2004 and 2005. Their inclusion will lead to extra costs of £29.7m.
The FSA is also beefing up its budget for taking enforcement action against companies that break its rules after it materially underestimated the costs of investigating split caps. Its enforcement spend to investigate and take action against companies that mis-sell is planned to rise 17 per cent to £25m for the coming year.
This is driven by the widening of its investigation into the mis-selling of split caps, which became much more costly than the regulator had anticipated as more companies became involved.
The regulator had to draft in more external help and planned costs overran by £1.9m to £4.2m. This means the FSA is expected to go over the budget set for 2003-04. The investigation into split caps is continuing and the FSA has budgeted £5m for external assistance in its enforcement action this year.
One of the FSA's main priorities for the coming year will be to scrutinise financial product advertising. Direct promotions were one of the main channels for selling precipice bonds, the high-risk investments in which thousands of consumers have lost their capital. The FSA has previously relied on consumers to alert it to adverts they believe are misleading.
"We have decided to sharpen the focus of and significantly increase the resources committed to our regulation of financial promotions," John Tiner, the chief executive, said yesterday.
The regulator also said it would have to double its contribution to its staff pension fund to make good a £50m deficit.Reuse content