City professionals employed by banks to help their clients avoid tax could be fined by the Financial Services Authority or struck off its register.

The financial watchdog is considering whether it should play a role in enforcing the government’s new code of conduct, under which banks are required not to sell products that enable tax avoidance.

Hector Sans, chief executive of the FSA, said that the regulator would discuss the topic in its autumn consultation on the FSA’s “fit and proper” test.

The test is used to assess whether City workers are “fit and proper” in terms of their professional conduct. If the FSA deems them to have failed the test, it can fine them or strike them off the register.

The FSA has not yet published details on how it will handle the voluntary code, which the watchdog predicts will be in the consultation stages till September. The government is asking all banks to sign up to the code, warning that those who refuse to, or who do not conform to the “spirit” of the current tax laws are opening themselves to greater scrutiny from HM Revenue & Customs.

“I’m sure [the consultation] will pick up on HMRC codes and any other codes”, said Sants.

Lord Turner, the FSA chairman, said: “The whole overlap between tax and regulatory arbitrage and the fit and proper test is one we are still thinking about.”

On Monday, shadow chancellor George Osborne outlined plans to scrap the FSA if the Conservatives win the next election.

This entry was posted on Thursday, July 23rd, 2009 at 2:59 pm and is filed under Banking, Investing, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.