FSA investigates network for compliance practices

31 May 2011 | By Natalie Thomas, Tessa Norman

The regulator is unable to reveal the name of the firm but has specified it is a mortgage network.

In April 2011 the FSA published its Retail Conduct Risk Outlook in which it said it had identified weaknesses in the network model and had concerns over control and oversight they exert over advisers.

In its paper it says: “Supervisory activity with networks continues to reveal significant issues with the control and oversight that networks exert over their appointed representatives, including monitoring procedures, levels of compliance resource and standards of due diligence carried out on incoming appointed representatives.”

Gary Watts, director of Which Network, says the FSA could be looking at issues surrounding how many appointed representatives the network has and whether it has the compliance resources to deal with them.

He says: “Another reason the FSA could be investigating a network is because of a poor file-checking regime. It is a network¹s responsibility to make sure ARs have the resources to make a record of all of the advice clients receive and why it was given.”

Watts adds that although it is ARs’ responsibility to make sure they run their business compliantly, it is the network’s responsibility to make sure they have the right tools to do so.

Richard Farr, director of Telos Solutions, says the FSA has been focussing on networks’ systems and controls over the past 12 to 15 months and that is where a lot of them have fallen down.

He says: “To comply with the regulator¹s expectations, firms need to put the right checks in place to ensure their compliance policy corresponds with their practices, that it has the right outcomes for the ARs’ customers and that these customer standards are continually met.”

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