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Are small firms prepared for the regulator’s treating customers fairly deadline on march 31?

Although small brokers have struggled to implement TCF in the past, our experts think they are on course for the FSA’s first deadline this year

Peter Curran: Last May the Financial Services Authority gave regulated firms their final deadlines for its Treating Customers Fairly initiative.

By December they must be able to demonstrate to themselves and the FSA that they consistently treat customers fairly. And it seems that the regulator is taking no chances, with an interim deadline to check on firms’ development scheduled for the end of this month.

So far progress has been mixed. The FSA is pleased that 93% of major retail groups and 87% of medium-sized firms successfully met its first TCF deadline in March last year but it’s disappointed that a sizeable number of small firms failed to do so.

Consequently, the FSA implemented the interim deadline for March 31. By that point firms need to have appropriate management information in place to test whether they are delivering the initiative.

Firms are responsible for setting their own TCF frameworks, which is where many small ones come unstuck. And the absence of clarity in the principles-based compliance framework could cause some brokers problems.

But it’s imperative that firms of all sizes continue to embrace the regulator’s principles and ensure they treat the TCF deadlines as milestones for improvement.

By now firms should have adopted TCF practices in their businesses and be looking at ways to develop them. With a deadline looming at the end of the March, some brokers may need to step up their efforts.

But firms have until December to fully demonstrate improvements. And the regulator has recognised that firms’ failure to meet its targets until now does not necessarily mean they have failed to engage with TCF. Nevertheless, time is running out.

Dave Hall: All regulated firms are required to implement the FSA’s TCF initiative but doing so has proven to be difficult. Nevertheless, firms of all sizes need to understand the role that TCF plays in restoring consumer confidence in the mortgage industry.

But embracing TCF and making it a fundamental part of one’s business is easy – the hard work starts when it comes to measuring practices against the FSA’s principles and working out what constitutes effective implementation.

Small firms received the most flak in the regulator’s TCF progress report last May, which showed that only 22% of them had met its March 2007 deadline.

But we should remember that these figures were based on research between December 2006 and January 2007, so it’s likely that progress was made by the time the results were published.

Perhaps the shift from rules-based to principles-based regulation explains why small firms have taken longer to implement TCF. The benefit of a principles-based framework is that it’s more flexible but the difficulty for small firms is that it requires more resources.

Large businesses can afford to dedicate resources where-as small, directly authorised brokers are likely to struggle finding affordable ways to document their strategies and processes.

But I think we are on course for the March deadline. Some brokers’ systems are already in place and helping them make improvements to their TCF strategies, with many more not far behind.

And help is at hand for struggling firms. The FSA has good online guidance and a call centre to handle regulatory enquiries. Alternatively, brokers could opt to join networks and benefit from their regulatory and compliance services.


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