There have been more than 20 press releases issued by the Financial Services Authority in 2007 highlighting the handing down of large financial penalties.
These releases provide a benchmark as to what is expected from a firm. So if you are directly authorised you should take time to look at and act upon the information provided by your compliance solution provider. And for appointed representatives, there is good reason behind the feedback from your principal.
Here are three of the FSA’s press releases.
January 8. FSA says firms need to improve mortgage advice process. The issues here include deficiencies in assessing customer needs – particularly affordability; training and competence; record keeping; and rather worryingly, systems and controls.
How comprehensive is your fact-finding document – is it the same one you have used ” How comprehensive is your fact-finding document – is it the same one you have used for years? Does it cover the relevant issues?”for years? Does it cover all the relevant issues? Is the budget planner adequate?
With regard to training and competence, do you keep relevant and up to date key performance indicators? How is your ongoing professional development recorded? How are your customer meetings assessed? How do you keep your skills and knowledge up to date?
Record keeping – where do you keep your files (a fire-proof lockable cabinet)? How long do you keep your files?
System and controls – this is a huge area, touching everything you do as a firm and as an adviser. How do you ensure yours are at the very least adequate?
February 12. FSA fines investment firm 10,500 for failings of its subsidiary. Although this identified the failings of an investment firm, this press release is probably the most pertinent of the three in terms of lessons to be learnt and questions to ask.
In imposing the fine, the FSA identified breaches of no less than four of its eleven principles. In brief, it identified:
lInsufficient personal and financial information recorded to ensure suitable advice;
lFailings in the monitoring of advice because of insufficient training;
l Failings in the suitability letter.
How does your firm record the suitability of its recommendation? If you were to look at a file, would it detail why the recommendation suited the customer’s financial circumstances – or their attitude to risk? If interest only, why, and how will the mortgage ultimately be repaid? Would it highlight any possible risks and disadvantages?
February 14. FSA fine Nationwide 980,000 for information security lapses. The main issue here was the security of customer details. This was a massive fine, albeit for a serious information security risk after the theft of an employee’s laptop. How much of an onus do you put on the safekeeping of confidential information?
Choosing the right compliance solution is a must – but so is appreciating exactly why you pay for the pain of compliance.
Neal Smith is compliance manager at The Whitechurch Network