FSA issues policy statement on future regulation for professional firms

Professional firms will be exempt from requiring direct regulation by the FSA if they carry out only certain restricted activities that arise out of or are complementary to the provision of professional services, such as arranging the sale of shares on the instructions of executors or trustees or providing services to small, private companies.

The firms will, however, be supervised and regulated by the designated professional bodies (DPBs) appointed by the Government.

There are a number of safeguards to protect consumers dealing with firms that do not require direct regulation. These arrangements include:

• FSAs power to ban a specific firm on fit and proper grounds from taking advantage of the exemption;

• rules which require exempt professional firms to ensure that their clients are aware that the firms are not authorised persons;

• a requirement for the DPBs to supervise and regulate the firms and keep the FSA informed on how the exempt professional firms carry on their regulated activities; and

• FSAs power to make a ''direction'' to prevent categories of firms from benefiting from the exemption, or, to restrict the regulated activities permitted to the firms.
  

Notes for editors

1. HM Treasury has designated all the existing Recognised Professional Bodies as DPBs. There are about 13,000 exempt professional firms out of the total of 15,000 or so regulated for investment business by Recognised Professional Bodies under current legislation. The other 2,000 firms carry on what is termed mainstream regulated activities and will need to be directly regulated by the FSA

2. The RPBs and the number of firms they certified for investment business at 31 March 2001, approximately 15,000 in all, are: The Institute of Chartered Accountants in England and Wales (4717 firms); The Institute of Chartered Accountants of Scotland (397 firms); The Institute of Chartered Accountants in Ireland (774 firms); The Association of Chartered Certified Accountants (811 firms); The Law Society (England and Wales) (6646 firms); The Law Society of Scotland (525 firms); The Law Society of Northern Ireland (544 firms); and, The Institute of Actuaries (43 firms).

3. The Professional Firms Sourcebook, which includes rules and guidance, is available from the FSA website: www.fsa.gov.uk

4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

5. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.