Financial Services Authority regulations 'barmy', says Treasury

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Financial Services Authority regulations 'barmy', says Treasury

Thu 19th Jun 2008

The Financial Services Authority (FSA) does not have a "robust enough framework" to regulate with-profit funds, the Treasury committee said today.

In addition, the FSA does not have clear principles for regulating inherited estates and instead becomes caught up in "micro-regulating" particular firms, the committee report found.

The inquiry, the conclusions of which were welcomed by the Financial Services Consumer Panel (FSCP), was to find out how well the interests of with-profits funds policyholders were being protected, especially concerning inherited estates.

As shareholders control fund strategy through managing life firms, conflict of interest can occur.

Committee chairman John McFall MP said the FSA gave no assurance that policyholders' interests were protected and that shareholder tax was an example of the FSA's "barmy regulation", allowing different rules for different companies.

The report also said it was inappropriate to charge compensation for mis-selling to inherited estates, and that shareholders should bear the cost.

Mr McFall was "astonished" that the Prudential had used £1.6 billion from its inherited estate to pay mis-selling compensation.

The FSCP said dealings with inherited estates were "far from transparent", adding: "Like the Treasury Committee, we want more action, more quickly", calling for firms to "stop defending the indefensible".