Industry lost 1,000 firms and 5,600 ARs in one year

The number of regulated firms and approved persons (ARs) in the financial sector dropped substantially in the last 12 months as a recession swept across the UK.

According to the FSA's Annual Report 2008/9, published today, the number of ARs fell from 172,077 on 1 April 2008 to 166,420 on 31 March this year, a drop of 5,657, or 3.29%.

Meanwhile, the number of regulated firms dropped to 27,340, a decline of 985 from 28,325, in the same period.

An approved person is an individual who has been approved by the FSA to perform one or more 'controlled functions' on behalf of an authorised firm.

The drops will further fuel speculation surrounding the future of the financial advice sector.

Critics of the FSA's Retail Distribution Review (RDR), a consultation paper on which is due to be released tomorrow, say its proposals will also lead to a significant reduction in the number of firms and advisers in the UK.

The regulator blames current market conditions for the drop and also cites the impact of the merging of controlled functions within some groups.

During the period between 1 April 2008 and 31 March 2009, the FSA says it approved 43,035 applications for individuals to perform controlled functions, a reduction on the previous year of approximately 17.5%.

During the same period 1,850 individual applications were withdrawn during the application process and 41,060 withdrawals of controlled functions were processed.

Meanwhile, the number of enforcement cases saw a sharp increase, jumping from 130 last year to 218 in 2008/9.

Enforcement or disciplinary action was taken in 175 cases, up from the 93 cases in the previous year.

scott.sinclair@incisivemedia.com

HAVE YOUR SAY:

"Don't forget this also covers the banks. In which case it would have been better if the figure was higher! Under 3.5% compares quite favourably with other sectors. There are 100 firms a day going insolvent. How much has unemployment increased over the past year - more than 3.5% I'll warrant. I think sometime we get a little too self absorbed and don't look at the wider picture." Harry Katz, Norwest Consultants