MPs call for public sector financial advice to be regulated
The Communities and Local Government Committee of the House of Commons has called for financial advisers to local government to be brought under the regulatory jurisdiction of the Financial Services Authority, in the wake of the Icelandic banking crash which has left many authorities out-of-pocket.
As well as monitoring the advice given by treasury management advisers, the MPs said that the FSA should also scrutinise the independence of companies that advise local authorities and to prevent conflicts of interest.
The committee also expressed concern that most of the major companies operating on this area claimed to be “authorised and regulated by the FSA”, when regulation treasury management advice does not apply to “professional clients” such as local authorities, although the same companies are regulated in many of their other areas of activity.
Bringing treasury management under FSA regulation, will require legislation which the chair of the committee, Dr Phyllis Starkey, said was “urgently required”.
She said: "As it stands, the FSA is powerless to intervene in the circumstances that led to a great deal of public cash being put at risk by the collapse of the Icelandic banks." said Dr Phyllis Starkey, chair of the committee.
"Under current rules cash deposits and professional advice relating to such monies remain an 'unregulated' activity outside the FSA's remit. New legislation is urgently required to tighten the regulatory approach taken to treasury management advice and activity in the public sector."
The committee also called for the FSA to conduct an investigation into the services provided by local authority treasury management advisers and the claims of potential conflicts of interest once it has assumed regulatory responsibility for their activities.
The full report of the committee can be read here.
As well as monitoring the advice given by treasury management advisers, the MPs said that the FSA should also scrutinise the independence of companies that advise local authorities and to prevent conflicts of interest.
The committee also expressed concern that most of the major companies operating on this area claimed to be “authorised and regulated by the FSA”, when regulation treasury management advice does not apply to “professional clients” such as local authorities, although the same companies are regulated in many of their other areas of activity.
Bringing treasury management under FSA regulation, will require legislation which the chair of the committee, Dr Phyllis Starkey, said was “urgently required”.
She said: "As it stands, the FSA is powerless to intervene in the circumstances that led to a great deal of public cash being put at risk by the collapse of the Icelandic banks." said Dr Phyllis Starkey, chair of the committee.
"Under current rules cash deposits and professional advice relating to such monies remain an 'unregulated' activity outside the FSA's remit. New legislation is urgently required to tighten the regulatory approach taken to treasury management advice and activity in the public sector."
The committee also called for the FSA to conduct an investigation into the services provided by local authority treasury management advisers and the claims of potential conflicts of interest once it has assumed regulatory responsibility for their activities.
The full report of the committee can be read here.
