The FSA has published Discussion Paper 07/4, Review of the Prudential Rules for Personal Investment Firms (DP07/4). In DP07/4 there is a discussion of potential changes to the prudential rules for personal investment firms (PIFs). The chapters of DP07/4 are set out as follows:

  • Chapter 2 sets out the background to the PIF sector and current regulatory requirements.
  • Chapter 3 provides a detailed analysis of the failures of the PIF market.
  • Chapter 4 considers the effectiveness of capital resources and payment protection insurance (PII) in reducing the frequency of mis-selling.
  • Chapter 5 looks at the effectiveness of capital resources and PII in reducing the detriment arising from mis-selling when firms are still operating as going concerns.
  • Chapter 6 covers whether prudential rules can reduce the detriment that arises when firms have either left the market and are unable to pay claims arising against them or are declared in default by the Financial Services Compensation Scheme.
  • Chapter 7 discusses whether the policy underlying the existing requirements is still valid, given the FSA’s market failure analysis.

DP07/4 is closely linked to the wider issues covered in the FSA Retail Distribution Review (RDR). The deadline for comments on DP07/4 is 7 January 2008.

View DP07/4: Review of the Prudential Rules for Personal Investment Firms