Broker networks will be reluctant to take on the responsibility of overseeing their members' regulatory activities, The Broker Network managing director Grant Ellis has warned.
He said networks had two options under the FSA's proposed statutory regulation.
"Members can become appointed representatives, with the network as the principal, or firms can be registered individually," he said.
Ellis said FSA chiefs had indicated that networks acting as principals would be considered a "higher impact", or greater risk, than individual firms, and would attract more scrutiny.
"This means you'd have a relationship manager and very attentive monitoring," he said. "To me, it's no contest."
Ellis said financial services firms, already regulated, had moved away from working in networks for that reason.
"The irony is that it is more cost effective if the FSA regulated via a network," he said.