The FSA's amnesty of a year's grace is a blow to thousands of firms who took the deadline seriously, says Andy Cook

' How does regulation feel? We've been waiting for three years, mostly in fear and confusion - but more recently in optimism - about the effects of regulation.

And now, at the last minute, the FSA has left our industry with a bitter taste in its mouth.

When the regulator announced that it would give intermediaries a year's grace from regulation, as long as they sent in their applications this week, brokers and insurers fumed.

Insurers have been holding very painful conversations with some of their agents in recent weeks that have seen hundreds of agencies cancelled because they have not produced their 'minded to authorise' letters.

On the flipside, brokers have been pulling out the stops all year to make sure that they had their 'minded to authorise' letters in place by the end of 2004.

So what happens now to those hundreds of brokers who thought they were going out of business or might have to sell up?

All the hard work of meeting regulatory requirements, so it seems, has been in vain. Everyone could have taken a more leisurely and stress-free approach had they known that this week was merely another check-off point, not a line in the sand.

Research by Grant Thornton (page 8) shows that most of the bigger firms have spent six figure sums to get themselves regulated and 30% of these bigger firms envisage spending six-figure sums every year to keep themselves regulated. Smaller firms envisage costs of up to £50,000 every year.

As any unauthorised intermediaries will not be covered by the Financial Services Compensation Scheme, there could be more trouble ahead. The FSA could see itself in very hot public relations water should one of these unauthorised firms fail and customers are left without compensation.

One can only hope that this will not happen as the outside world will not read the subtleties of FSA regulation, only that there are policyholders without recompense and in a regulated industry.