The Financial Services Authority today called for an improvement by retail networks in their supervision of appointed representatives.
This follows an FSA survey which found a number of potential shortcomings in areas such as the level of compliance resource in Principal firms, the quality of desk checks and field visits to check ARs’ compliance, the use of computer systems for monitoring ARs and how far networks operated a risk-based approach to monitoring of ARs.
The FSA is today publishing a Factsheet suggesting how networks can improve practice in three main areas: compliance and the approach taken to supervising ARs, admission to membership, and documented procedures and management information.
Alison Hewitt, head of department, retail firms division at the FSA, says: “We expect networks to apply appropriate controls on their ARs so that these firms maintain the same standards as directly authorised firms in their dealings with customers.
“Our emphasis at this stage is to help networks improve and the Factsheet is designed to help achieve this. However we will be carrying out further work next year to monitor the position and will take appropriate action where concerns remain.”
Best practice recommendations in the Factsheet include:
* Compliance and the approach taken to supervising ARs: Senior management should establish and maintain effective systems and controls to comply with FSA requirements for monitoring of ARs.
The organisation and responsibilities of the Principal’s compliance function should be documented and it should have enough competent staff who are sufficiently independent to perform their duties objectively. Firms should also ensure their procedures relating to the monitoring and approval of financial promotions remain effective.
* Admission to membership: Before registering an AR, Principals should be able to demonstrate how they have assessed its financial situation and its knowledge, ability and good repute to carry on regulated business. The written contract between the Principal and its ARs should include all the information required under FSA rules.
* Documented procedures and management information: The FSA would encourage the use of documented procedures and management information which is sufficiently detailed to enable senior management to identify, manage and control risks associated with ARs and to take remedial action for any compliance breaches.
The FSA survey involved visits to 15 networks carrying out a mixture of investment business and mortgage and insurance mediation. They varied in size from 10 to nearly 850 ARs. The messages in the Factsheet also apply to firms who appoint ARs but do not meet the definition of a network.