The potential concession was signalled during Lords debates on the Financial Services and Markets Bill by Chief Whip Lord McIntosh of Haringey.
But he made it clear ‘that a firm which carries on or holds itself out as carrying on activities which it is not permitted to carry on will commit an offence.’
He said the principle that professional firms should keep within the rules of the FSA or another designated body subject to criminal penalties was agreed by the professional bodies.
What was at issue was that a breach would render inoperable a firm’s entire exemption and mean that all exempted regulated activities undertaken would be illegal – not just the particular transaction which broke the rules.
He said the Treasury had held discussions with the professional bodies and made it clear the government is prepared to look at the issue again.
But he rejected a Tory bid to introduce amendments to the Bill on the issue. He also rejected an amendment that where firms sought direct regulation by the FSA for financial services which required it should not find their whole practice became subject to the FSA.
He said firms carrying out mainstream investment business had to be subject to the FSA and that the FSA had to consider an authorised firm’s overall fitness to conduct financial services.