We can say with some certainty that we are in the end game of preparations for regulation.
Policy statements PS174 and 159 must bring a realisation, among even the most relaxed practitioners, that something now needs to happen.
Much has been said recently about the level of resources that smaller brokers have as opposed to their larger competitors and the fact that this affects their pro-activity.
I have some sympathy with this argument, but we should also recognise that there are some areas of impending
regulation that will hit smaller
For example, the proposed capital adequacy requirements for FSA regulated brokers are likely to have a bigger impact on smaller firms, as they impose a new threshold of capital.
This might cause some
brokers to look seriously at their cashflow and decide whether they will have the resources to set aside the required money.
Most unincorporated brokers
I know do not keep surplus
capital within their businesses, unless it is for something
specific, such as funding expansion. Why should they?
To have to find a substantial increase in the capital base of a firm may well prove very stretching for some intermediaries. The only saving grace may be that there are still 16 months left to prepare for any actual increase.
However, there is less time to consider how best to demonstrate this in writing during the application process.
The fact that the FSA has listened to feedback and reduced the capital requirements for some brokers is encouraging. But this is no help if it is not applied as a template now to your existing business. Learn by applying the new rules to the infrastructure you presently have in place and you will have time to make the necessary tweaks that may make the FSA application smoother.
Gary Dixon is managing director of Compliance Solutions. Email: