06 August 2004
Puzzling omissions in new Financial Services Authority regulations have jeopardised arm's-length housing bodies' ability to provide insurance to thousands of tenants, it emerged this week.
Public Finance has also learnt that other public bodies providing or using financial services – including Transport for London – have approached the Treasury and the FSA with concerns about the legislation, which is due to come into force in January 2005.
The National Federation of Almos and TfL are seeking clarification on why their organisations have been excluded from a list of public bodies that are exempt from the regulations.
From 2005, the FSA will require all bodies providing certain financial services to receive authorisation – effectively licensing them.
Authorisation should have been sought before July 13, but many bodies only recently became aware that they were not exempt automatically, as are local authorities and registered social landlords.
Consequently, an unregistered Almo offering contents insurance to tenants from next year, for example, would be doing so illegally.
Catherine Park, head of finance at Hounslow Homes, said: 'Many of our tenants are economically disadvantaged and their only realistic access to affordable insurance is through our tenants contents scheme. Anything that could put this scheme in jeopardy is a serious concern.'
The FSA has called on bodies unsure about their status to register, but, though the 'licence' fee is minimal, other expenses could amount to £30,000, Almos claim.
It is unclear whether the omission of so many public bodies is an oversight, or whether the FSA intended them to pay for authorisation.
An FSA spokesman said it had not yet received 'defined legal advice on [Almos'] exemption status'. But the watchdog warned that it would 'act quickly' to prevent any unauthorised body providing financial services. Confusion surrounding the regulations has affected all parts of the public sector.
A spokesman for TfL said: '[We] have contacted the Treasury on the matter of the organisation's local authority status as TfL is deemed a local authority for some purposes but not for others.
'The changes we have asked the Treasury to look at are essentially housekeeping matters, which are designed to make clear that TfL is a local authority for [some] purposes.'
It is understood the FSA used a definition of local authority dating back to the 1970s. Under more recent definitions, the fledgling TfL could be included and therefore be exempt. However, Park and other public sector specialists believe they could yet overcome the problem: organisations that undertake services that do not turn a profit are exempt.
This 'by way of business' exemption was acknowledged by the FSA as 'a strong argument that would be looked at accordingly'.
A Treasury official said: 'We will consider representations carefully. But our general policy is that consumers… should receive as much protection as possible, and that protection should apply to as many consumers as possible.'
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