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Find handy hints in FSA handbooks

The FSA wants firms to become familiar with its rules before changes come into force next year and its specialist handbooks are a good starting point, says Bill Warren

The Financial Services Authority has urged firms to become more familiar with the parts of its Handbook that are most relevant to their sector to prepare for changes in 2007 that include the Capital Requirements Directive.

In particular, the tailored, personal and Focus On handbooks are cited as good ways of doing this. Presumably, the idea is that if a firm is using a tailored handbook, when the changes feed through to that handbook the firm only has to take note of the changes that affect its sector, not all of them. It could be argued that if only changes relevant to a particular firm are concentrated on, the various industry sectors will be much quicker at understanding and implementing the changes.

But at the sharp end it may be that mortgage and general insurance firms have not so far taken advantage of the tailored, personal and Focus On handbooks, and in fact do not refer to the main Handbook frequently either, in which case it’s probably a good idea to get familiar with the smaller versions. If the regulator has urged us to do so it would be foolish to continue to ignore it.

Tailored handbooks were launched in June 2005 following a successful pilot exercise in the mortgage and general insurance broker sector. They were designed to cover around 70% of the FSA’s regulated firms and were targeted at smaller firms such as mortgage and general insurance brokers, IFAs and friendly societies.

There are 14 handbooks available and in our sector there are separate versions for general insurance brokers, intermediaries selling insurance, investments and mortgages and intermediaries selling insurance and investments as well as brokers selling investments and mortgages, mortgage and general insurance brokers and mortgage brokers.

Great care has been taken to cover all possible combinations so each tailored handbook contains all a firm needs but no more.

For example, the tailored handbook for mortgage and general insurance brokers contains core sections such as the glossary, high level standards, training and competence, supervision, and dispute resolution. But only Insurance Conduct of Business and Mortgage Conduct of Business are included without the COB section, which does not relate to mortgage and general insurance business.

Anything to do with financial markets is excluded as are specialist sourcebooks. On the whole, the sections contain the same material as the full Handbook, although some of this has been slimmed down.

For a more targeted approach to suit individual firms, the FSA introduced personal handbooks in April 2006, to “make us easier to do business with and contribute to better regulation”. Any firm can build a personal handbook by registering on the personal handbooks section of the FSA website. A series of filtering questions must be answered across 10 topics including prudential categories, regulated activities, financial promotions and client types.

These filtering questions are detailed but happily contain numerous tips on how to answer them. Once a personal handbook is set up it is accessible from the ‘My Favourite Handbook’ link on the regulator’s website,

The third quick route to relevant sections of the FSA Handbook is via the 20 Focus On handbooks. If the tailored handbooks are seen as slicing the Handbook vertically by sector then the Focus On handbooks slice it horizontally by topic – for example, appointed representatives, approved persons, financial promotion, Financial Ombudsman Service, perimeter guidance and record-keeping.

Each topic includes information relevant to every sector the FSA regulates. For example, the record-keeping Focus On handbook contains the specialist sourcebooks across all regulated sectors.

In engaging with FSA handbooks – whether it’s the main Handbook or the specialist versions – it is useful first to print off the 11 pages of the User Guide. This contains instructions for navigating handbooks online, an explanation of the icons used, search tips and a host of other useful information.

But is it valid to rely on the tailored handbooks? The FSA says that “if you have followed the instructions and your firm breaches a requirement in the Handbook because you reasonably rely on the fact that it isn’t in the tailored handbook, we will not bring disciplinary action”.


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