Blog: Why do firms ignore FSA warnings?

Last week's update on the FSA’s pension switching review has brought to light yet more cases of firms being warned by the FSA over their conduct, systems and controls, or the suitability of their advice...and then doing nothing.

While it is often huge fines which make the headlines, we have seen little of the remedial work the FSA carries out behind closed doors.

A series of recent fines and today's update on pension switching have shown firms that don't live up to the FSA's expectations often fail to improve matters, even once the regulator has intervened.

Of the worst-performing firms in it original review - the 25% who provide unsuitable advice in 33% or more of their pension transfer cases - there has been "little or no" improvement over 18 months later, the FSA said..

Of the 22 firms selected for a re-review, not one has escaped further action, either in the form of fines or compulsory redress and past business reviews.

This is not limited to pension switching business, and a recent fine for Credit Suisse shows huge international businesses are also failing to take action after the FSA raises its concerns.

Recent cases include:

RSM Tenon

• Concerns first raised: FSA's initial visit in 2008 - remedial action recommended
• Further action: Follow-up visit in late 2009 - advice considered still short of standard
• Result: Fined £700,000 for unsuitable pension switching advice and other failings

Park Row

• Concerns first raised: 2006 - increased case checking recommended
• Further action: FSA repeatedly raised concerns before visiting in 2009
• Result: CEO Peter Sprung fined £49,000 for continued failings

Credit Suisse

• Concerns first raised: 2007 - firm warned about inaccurate transaction reports
• Further action: Further warnings in 2008 but fails to take action
• Result: £1.75m fine
  

One has to wonder how - and why - so many firms are persistently unable to raise their standards.

This raises major questions about the way the FSA communicates with firms that are failing in their duties, and how firms take on board the information they are given.

Is the FSA failing to communicate what is wrong? Are firms unsure how to stamp out their problems, or are they simply unwilling?

Perhaps they lack the resources to take action, or is the risk of financial penalty not worth the effort of making improvements?

The industry and the regulator need to consider all of these questions, otherwise poor advice and poor consumer outcomes will persist.

Let us know what you think.