AIFA calls on FSA to re-gauge cap ad impact on small firms

The trade body for independent advisers has called on the FSA to use the extra two years it has permitted for firms to meet its capital rules to reconsider their impact on small businesses.

AIFA said the levels of capital proposed - a minimum of £20,000 or capital resources equal to at least three months of annual fixed expenditure - are "disproportionate for small firms with no systemic risk".

Currently, firms are either subject to a flat-rate ('own funds') test or an expenditure-based requirement. In both cases the minimum is £10,000.

The new rules were due to be phased in between December 2011 and December 2013 but the FSA yesterday said it would defer these plans by two years - to December 2013 and 2015 respectively.

"AIFA has long argued that the regulator's approach to prudential regulation is fundamentally flawed," director of policy Andrew Strange said.

"We call on the FSA to use this additional time to carefully reconsider the rules."

AIFA otherwise said a two-year delay to the implementation of the rules was a "welcome and pragmatic" move given the trading conditions of recent years and other regulatory developments.