Economic secretary Melanie Johnson said a ‘belt and braces approach’ would render the rules subject to FSA approval to ‘allow more fine tuning’ than possible through provisions in primary or secondary legislation.
Speaking during Commons debates on the FSA Bill, she said this would ensure sufficient safeguards to prevent firms escaping stricter direct FSA regulation for financial services operations by sheltering under their professions – but also avoid firms seeking unnecessary precautionary authorisation.
Johnson was replying to Tory demands for a clearer definition between what is permissible relying on supervision by the professional bodies and what is not to prevent firms flooding the FSA with applications in order to be on the safe side.
She said: ‘The rules must define activities that are not merely incidental, but are supplementary to a service provided to a client and must be approved by the FSA.’
Earlier she warned the FSA will be allowed to make rules requiring exempt professionals to disclose to their clients that they are not authorised.
A series of new clauses added to the bill also require the bodies to make rules which are designed to ensure that members who benefit from exemption only carry on regulated activities which arise from or are complementary to providing professional services to a particular client.
She warned: ‘If a member of a profession breaches those rules, he will be carrying on particular regulated activities in breach of the general prohibition, and therefore committing a criminal offence.’
The FSA will retain the right to ban specified individuals as ‘not fit and proper’ to carry on regulated activities.
Johnson claimed the professional bodies have been involved in consultations and ‘are broadly content with the Government’s proposals.’
Eight new clauses were added to the Bill spelling out the compromise at a late stage – avoiding Tory or Liberal democrat amendment in the Commons but subject to scrutiny when the legislation is debated in the Lords.
Shadow financial secretary, accountant MP David Heathcoat-Amory said rules banning a professional from being paid by anyone save his client might be ‘unduly restrictive’.
He warned of a danger that some professionals would seek dual authorisation through professional bodies and the FSA and take advantage of any differences in the rules.