APFA RESPONSE DEPARTMENT FOR BUSINESS, INNOVATION & SKILLS CONSULTATION SMALL BUSINESS APPEALS CHAMPIONS AND NON-ECONOMIC REGULATORS

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1 APFA RESPONSE DEPARTMENT FOR BUSINESS, INNOVATION & SKILLS CONSULTATION SMALL BUSINESS APPEALS CHAMPIONS AND NON-ECONOMIC REGULATORS ABOUT APFA The Association of Professional Financial Advisers (APFA) is the representative body for the financial adviser profession. There are approximately 14,000 adviser firms employing 81,000 staff. 40% of investment and protection products are sold through financial advisers, with annual revenue estimated at 3.8 billion ( 2.2 billion from investment business, 1.2 billion from general insurance and 400 million from mortgages). Over 50% of the population rank financial advisers as one of their top three most trusted sources of advice about money matters. As such, financial advisers represent a leading force in the maintenance of a competitive and dynamic retail financial services market. APFA welcomes this opportunity to respond to the Department for Business, Innovation & Skills consultation on Small Business Appeals Champions and Non-economic Regulators. SUMMARY APFA welcomes the proposal to introduce of a small business appeals champion. Smaller businesses often feel they do not have the expertise, time or money to be able to effectively question or challenge the regulator. There is also a fear that any questioning of the regulator will result in a black mark against a firm s name or that any concerns raised will not be given proper consideration. Therefore any mechanism that helps redress the balance, and ensures that smaller businesses feel they are able to get a fair and proper hearing, is to be welcomed. We would however suggest that the list of organisations that have such a champion should be expanded to include Ombudsmen. By way of example, whilst the Financial Conduct Authority (FCA) is classed as a non-economic regulator and is therefore subject to the Regulators Code, the Financial Ombudsman Service (FOS) is not. A FOS Ombudsman has the power to order a firm to pay out up to 150,000 in redress, and therefore its decisions can have a significant impact on a small business. However many small firms lack the resources or expertise to effectively present a case to an Ombudsman, there is no right to a hearing and no mechanism for a firm to challenge an Ombudsman s decision. Many small firms therefore feel that decisions are being made by the Ombudsman which can have a significant financial impact on them, but which they are powerless to challenge. APFA therefore believes it would be beneficial to have a Small Business Appeals Champion whose remit covers both the regulator and the related Ombudsman. 26 Throgmorton Street London EC2N 2AN Registered in England No Registered office: 100 Fetter Lane, London, EC4A 1BN

2 RESPONSES TO INDIVIDUAL QUESTIONS Question 1: Do you agree that the creation of Small Business Appeals Champions for noneconomic regulators will lead to improvements in businesses access to, and experience of, effective appeals and complaints mechanisms? In general we would welcome the introduction of a Small Business Appeals Champion, and as explained in the summary, we hope it will help redress some of the imbalance that currently exists between smaller firms, lacking in expertise, and a well-resourced regulator. However the introduction of such a Champion should not be allowed to result in an overly expensive burden on firms. Firms already have to bear significant costs as a result of regulation and we would not wish to see such costs added to unnecessarily. Question 2: Do you agree that legislation is necessary to establish Small Business Appeals Champions, and to set out their basic powers and duties? We agree that legislation is the best way to establish Small Business Appeals Champions, and to set out their basic powers and duties. Question 3: Is the proposed statutory objective appropriate? If not, how should it be modified? The proposed statutory objective appears appropriate Question 4: Is the range of areas described at points (i) to (vi) [above] adequate? If not, what do you think should be added or not included? The areas identified that the Champion should focus on appear to be appropriate. Question 5: Do you agree with the proposals in respect of the Champion s report? Question 6: Do you consider it necessary to enshrine the duty to report in law? We believe it would be preferable to enshrine the duty to report in law. 2

3 Question 7: Do you agree that regulators should be under a duty to provide relevant information when requested by a Champion? We agree that regulators should be under a duty to provide relevant information when requested by a Champion. Otherwise if a regulator does not consider it to be a priority to respond, the Champion may not be able to enforce their request. Question 8: Do you anticipate any potential conflict of this requirement with any statutory restrictions on disclosing this information or other obligations of confidence? Are these avoided altogether by the fact that the Champion is appointed for the regulator? Given that it is not envisaged that the Champion s recommendations will consider individual decisions, we do not foresee any potential conflicts with statutory restrictions on disclosing information. Question 9: Do you agree that this comply or explain approach is appropriate, and that it should be set out in guidance rather than legislation? We agree that a comply or explain approach is appropriate, however we would suggest that it should be set out in legislation, rather than guidance, to ensure that it can be enforced. Question 10: Do you agree that to do the job effectively the Champion should normally be at the equivalent of Board level? Question 11: Do you agree that the Champion should have a background in the type of business predominantly regulated? We agree that the Champion should have a background in the type of business predominantly regulated. However we would suggest that the requirement may need to be more specific in some sectors where the type of firm that is regulated is very diverse. For example, the financial services industry regulated by the FCA ranges from global banks that employ thousands of people to a sole trader financial adviser. Therefore the Champion needs to represent the type of business within the sector that tends to be smaller. So for example in financial services the champion should not have a background in banking or insurance, but should have experience of a smaller intermediary firm (e.g. financial adviser or insurance broker). 3

4 Question 12: Do you agree that Champions will be able to operate effectively as part-time appointments? We would envisage that this should be the case, although the amount of time required may depend on the complexity of any particular regulator s scope etc. Question 13: Do you agree that the support which Champions are likely to require from regulators staff will be limited? We would envisage that this should be the case, although the amount of support required may depend on the complexity of any particular regulator s scope etc. Question 14: Do you agree that in some cases it would be sensible for one Champion to cover more than one regulator? Do you know of any groups of regulators where this approach might be worth considering? Question 15: Are there any cases where sharing regulators would be inappropriate? Why? Question 16: Do you agree that in order to ensure genuine independence, appointments should normally be made by whoever appoints the regulator (typically the relevant Secretary of State)? Question 17: Do you agree that the role should normally be added to an existing office-holder or employee s responsibilities? We do not believe it is possible to generalise. For example, whilst the FCA has a Complaints Commissioner, the current incumbent has a legal background and therefore would not seem to match the profile required for a Small Business Appeals Champion. There may be more suitable candidates amongst the non-executive directors of the FCA, but we do not believe the appointment should be constrained by the make-up of any particular regulator s board. So whilst an existing office-holder or employee may be a suitable starting point, we do not believe other options should be excluded. It is also important to ensure that the Champion is independent of the regulator - and is perceived to be so - and therefore adding the role to that of an existing office-holder or employee should only be an option if that independence can be assured. Each appointment to a regulator should therefore be considered on its particular merits. 4

5 Question 18: Do you agree that Champions contracts should normally be based on existing arrangements for appointments in respect of a particular regulator? Are there any regulators for which this will not be possible? Question 19: Are you aware of any non-economic regulators where the appointment of a Champion would not be legally or practically possible? If so, what alternatives do you suggest? Question 20: Do you agree that any familiarisation costs for business associated with the appointment of Small Business Appeals Champions are likely to be very low? Question 21: Can you suggest how much time a typical business might need for such familiarisation? We believe the amount of time that a typical firm might need for familiarisation with the appointment and role of the Champion is likely to be small (e.g. the time taken to read an summarising the appointment and role). APFA 11 th April