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Wading through cement

31 July 2006 Angelo Coppola

Gerry Anderson - from the FSB - was present at last week's fpi convention and provided an overview of what the regulator has on his collective plate.

He says that there is no cap in terms of the number of advisors that will be allowed to be licenced or registered. He says that the rumours untrue, and in fact the lower end of the market needs more not less advisors.

He did confirm that the FSB is seeing 100 new applicants per month. There might be some new ones, some previously declined applications, and even some rehabilitated insolvents.

Anderson predicts that the numbers will increase by 1000 per annum, although this will increase as the access initiatives kick in, the numbers won't go down.

On the question of the backlog, he says there are still 1000 applications in the process - with just 400 problematic ones, and the so-called backlog. Anderson says that there has been interaction with the 400, and the majority of them may well be declined. The backlog also included changes to profiles, which has taken longer than normal.

Anderson said that a service level agreement will see the light of day soon, with a guaranteed time in which an issue is resolved.

It appears, according to Anderson, that among the 1000 are applicants that weren't too worried about providing all the required information, as they could continue to operate under the exemption /amnesty clause. Anderson warned again that the exemption will soon come to an end.

As of today the 13 400 licences represent 140 000 individuals, representatives and key individuals.

On a slightly different note it appears that internationally regulators are looking at better enforcement, although there is a difference between statutory contraventions and technical issues, Anderson says the prosecution of statutory infringements is reliant on the prosecution authorities.

There is one case that has been placed on the role for mid 2008. Anderson says that this is indicative of a problem - it may well be a priority issue, on a prosecutorial level.

Anderson also cautioned that there could be the introduction of legislation that mirrors the securities services Act, which allows for the appointment of an administrative enforcement committee.

Enforcement and justice must be seen to be done. This will affect the long term and short term players, and all the operators in the financial services sector - and the committee focuses on naming and shaming people who don't adhere to compliance regulations.

This will be an independent committee which will hear cases and determine their validity or otherwise, in much the same way as the FSB market abuse directorate does currently.

Turning to retirement fund reform, Anderson explains that the pension funds Act is the oldest act on the system. The most recent information is that the latest discussion document will see the light of day before the fourth quarter of this year. The input from all will or should result in a modern piece of legislation.

In terms of contractual savings Anderson says that there are several working groups active and solid progress has been made. There has been interaction with most players, and a large pile of paper generated.

We are nearly there, says Anderson. The issues have been split into various work streams - priority 1 is commissions and the future and structure thereof, and he expects that some activity will be announced in the next 60 days.

Other initiatives, such as the pension funds surplus initiative, are slow moving and he had hoped for more speed. Assistance is needed from the pension fund administrators.

Hedge fund regulation direction change announced, but who will be controlled?

On hedge funds, Anderson says that process started several years ago, and initially it was planned to do something under the Collective Investment Schemes Act. A discussion document saw the light of day and a stalemate was reached, with trading and tax issues the main stumbling blocks.

It (drive for hedge fund legislation) has died down, but there appears to be a change in strategy. On the FAIS side, they are finalizing a new category of financial service provider - specifically to cater for managers of hedge funds.

This category should be in place by the end of the year. At the same time a section for advisors - for people operating in the hedge fund sector, with implementation pencilled in by mid 2007.

Understandably qualifications, disclosure and experience requirements are higher than is currently the case for the product providers and advisors in FAIS. Internationally it remains a thorny issue, while here they are a risky issue, but if this is brought into the regulatory net then a proper job should be done, says Anderson.

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