Memorandum by the Financial Services Practitioner
Panel
INTRODUCTION
Sections 8, 9 and 11 of the Financial Services
and Markets Act 2000 ("the Act") set out the requirements
for the Financial Services Authority ("the FSA") to
consult practitioners—a key part of the accountability framework
set up by the Act to monitor the considerable powers of the single
regulator. The Financial Services Practitioner Panel ("the
Panel") was set up, as the Practitioner Forum, by the FSA
in 1998 to create a high-level body to which it could turn for
opinions on matters having an impact on regulated firms.
Subsequently, the Act established the Panel
as a statutory body, alongside the Consumer Panel, which represents
the interests of consumers to the FSA. This was in recognition
of the important role of both Panels in the accountability and
regulatory framework established under the Act.
Both the Practitioner and Consumer Panels became
statutory on 18 June 2001, from which date the Panel adopted the
name of the Practitioner Panel, as it is called in the Act, rather
than its previous name of practitioner Forum.
Earlier last year, the Panel's Chairman, Donald
Brydon, and Colin Brown, the Consumer Panel Chairman, gave evidence
to the Treasury Select Committee ("the TSC") on the
operation of the two Panels and to review how they were contributing
to the accountability framework of the FSA. The Select Committee
questioned both chairmen closely on their relationship with the
FSA, and challenged the Panels firmly on their approach to monitoring
the FSA. The transcript of the oral evidence given to the TSC
can be found at: http://www.publications.parliament.uk/pa/cm200102/cmselect/cmtreasy/600/2020501.htm
MEMBERSHIP
Membership of the Panel is constructed to represent
the various sectors within which regulated financial businesses
operate, based mainly on nominations made by trade associations.
Members are drawn from the most senior levels of the industry.
The very senior level of membership of the Panel, as then established
and since, reflects the intention to create a body with both the
experience and authority to inform the FSA of the impact of the
developing regulatory framework on regulated firms. The Act only
specifies two sectors which must be represented, these being recognised
clearing houses and recognised stock exchanges.
The Panel proposes potential new members when
necessary, who are then formally appointed by the FSA. The Chairman
must have the formal approval of the Treasury. The Panel aims
to rotate its membership to ensure a balance between consistency
and new input. The Panel also includes the co-chairmen of the
FSA's Small Business Practitioner Panel.
ROLE OF
THE PRACTITIONER
PANEL
The Panel's remit is to represent the interest
of practitioners, and to provide input to the FSA from the industry
in order to help it in meeting its four statutory objectives and
seven principles of good regulation.
The main Panel objectives are:
— to monitor the FSA's effectiveness
as seen by the industry;
— to communicate to the FSA issues
of general concern to regulated businesses about regulation in
practice;
— to respond when requested to by the
FSA with a practitioner view of key regulatory issues; and
— to contribute a broad financial industry
view on the formulation of FSA policy and on the response the
FSA proposes to make to representations it has received during
any formal consultation process.
As an important part of the monitoring objective,
the Panel regularly conducts a survey of regulated firms to seek
their views on the FSA's performance. In 1999, it undertook the
first survey of regulated firms. The Panel undertook a second
survey in 2002 and will repeat it again in two years. In this
way it will build up a continuous picture of how the industry's
view of the FSA and its regulatory framework is developing.
The Panel takes care to ensure it does not duplicate
the important work of the trade associations in representing the
views of their members. These associations generally have the
staff and resources to promote the interest of their respective
members in response to the impact of FSA regulatory policies on
the sector they represent. The Panel aims instead to speak across
all sectors in offering input at a strategic level.
The Panel also monitors any possible breakdown
in dialogue between the FSA and trade associations on particular
issues and maintains regular contact with trade associations.
STATUTORY STATUS
On 18 June 2001 the commencement order giving
statutory status to both the Practitioner and Consumer Panels
under the Act came into force. Section 11 of the FSMA brought
an important part of the formal accountability of the FSA to the
Practitioner Panel into effect. This provides that, should the
FSA ever reject formal advice offered by the Panel, it should
have to explain its reasons in writing. The same also applies
to the FSA's relationship with the Consumer Panel, and both Panels
have therefore agreed a common process for managing these "section
11 representations".
It is important to strike a balance between
ensuring that section 11 can be applied effectively, whilst at
the same time not weighing down free and frank debate by unnecessary
formality or bureaucracy. Neither Panel expects that formal representations
under the Act will be made often, and none have been made to date
since the provision was brought into effect. This is nonetheless
an important facility: whilst the Panel has no fear that the present
FSA administration would ever seek to sideline the Panel or its
views, it is important to protect against such a possibility in
the future.
ACCESS TO
THE FSA
Generally, the Panel enjoys the benefit of useful
and productive discussions at meetings with FSA staff. The Panel
Chairman meets regularly with the Chairman of the FSA, and has
appropriate access to the FSA Board, and these contacts provide
the opportunity to communicate issues of particular import and
emerging concerns. The Panel's annual report is the subject of
a formal presentation to the FSA Board.
There are frequent more informal and ad hoc
contacts between the Panel members and Directors and senior executives
of the FSA. Managing Directors regularly attend Panel meetings
to update the panel on current issues within their responsibility
and generally impacting on the FSA's work. Senior FSA executives
regularly attend meetings to present on policy developments, seeking
the Panel's views before going out to wider formal consultation.
The Panel also maintains a dialogue with the
Consumer Panel, in particular through meetings between the respective
chairmen. Others with whom the Panel has had useful discussions
during the year are Rosemary Radcliffe, the Complaints Commissioner,
and Walter Merricks, the Chief Ombudsman of the Financial Ombudsman
Service.
BUDGET
The Panel is supported by one researcher whose
costs are borne by the FSA. Ad hoc expenditure, such as the cost
of the annual report and its bi-annual survey of regulated firms,
is agreed with and paid for by the FSA. The Panel has no other
formal budget but reserves the right to request support from the
FSA as judged necessary.
The Panel keeps under review whether this continues
to be the most effective way of operating, but for the present
considers this the right approach since regulated businesses ultimately
pay for the costs of the FSA. This approach does require the unremunerated
support of members of the Panel and the assistance of the FSA
Secretariat.
2 April 2003
Note: Further general
information about the Panel is available at www.fs_pp.org.uk
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