The government is to rely on professional bodies to lay down, in their own rules, the dividing line between firms that need authorisation from the Financial Services Authority and those that do not. Economic secretary Melanie Johnson said last week 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. 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 would 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. Johnson warned: ‘If a member of a profession breaches those rules, they 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 said the professional bodies ‘are broadly content with the government’s proposals’.
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