Financial Conduct Authority (FCA) executive director for consumers and competition Sheldon Mills says he is “cautious” about using funds gathered from fining firms to pay for regulator or its industry levies.
Mills (pictured) also noted that while much of the soaring Financial Services Compensation Scheme (FSCS) levy was down to smaller firms, there were larger advice firms who had not always followed the rules.
He was quizzed on the subject by Scottish National Party MP for Glasgow Central Alison Thewliss while giving evidence to the Treasury Select Committee of MPs.
Raising the issue of the soaring levy, Thewliss asked Mills whether fines collected from poorly operated firms could be used to ease the levy.
“It’s always a difficult one with having an enforcement division as people often put calls on what those fines should be used for,” Mills said.
“They go into the Treasury consolidated fund. We get calls that they should fund the organisation, the FSCS and also the levy. In a sense it’s a matter for government to think through.
“My only caution about things like that is the incentives it can drive in terms of the agency and what it does. So I’m always personally cautious in relation to those sort of suggestions,” he added.
Level of risk
Thewliss also asked how else the funding arrangements could be facilitated to ensure the polluters were paying, and whether the FCA was considering adapting the level of fees to match the scale of risk offered by each firm.
Mill noted the FCA was reviewing the system and that the key issue at present was harm or mistakes had been generated in the past but were coming through the system and being paid for today.
“So it can be difficult to work through and have a sense of the levy in which effectively the polluter pays,” he said.
“We recognise that particularly in terms of investment firms, some of the larger firms, not all but some of them, by-and-large have been meeting the standards and complying.
“And there are some firms which are smaller and might not contribute as much because of their size, which might have failed consumers and that is putting a significant cost on the levy,” he added.
