The Association of Independent Financial Advisers (Aifa) has criticised the Financial Services Authority (FSA) over its latest paper on prudential rules for personal investment firms.

Aifa expressed concern that the paper does not fully address the debate about the purpose and role of capital, while displaying a lack of understanding of the IFA sector.

Fay Goddard, deputy director general of Aifa, says that the paper repeatedly claims that firms make conscious decisions to mis-sell and that such a claim is “extreme and does not address the real debate about the purpose and role of capital”.

She goes on to refute the claim that low capital affects a firm’s behaviour and can lead to a risk of mis-selling.

Aifa claims that higher professional and ethical standards combined with closer supervision by management, as well as risk-related capital based on clearly defined criteria would meet the required outcomes of the review.

In related news, Aifa recently urged the government to protect future pensioners in light of the Pensions Bill being read for the second time in the House of Commons.

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