Bankhall is urging adviser firms to review their systems and controls in light of the Financial Services Authority’s increasing scrutiny of this area.
Nick Kelly, managing director at Bankhall, says the FSA is currently carrying out a supervisory review of a small number of directly authorised firms to assess whether their systems and controls are up to regulatory standards.
He says he expects the initiative to be rolled out across more firms and to be implemented in a similar way to the lender’s treating customers fairly roadshows.
Kelly says: “Due to its more intrusive supervisory approach we are seeing the FSA placing a greater emphasis on the capability of individuals holding controlling functions within adviser firms and making them more accountable for their actions.
“As part of its credible deterrence approach the FSA is also levying higher fines, which in 2010 almost trebled to £89m, compared to those in 2009. The FSA is sending out a clear message and firms need to ensure they have robust controls in place to protect themselves.”
He says that the regulator is now expanding its scope when considering who is accountable for failures, nothing that there are a growing number of cases in which the FSA takes action against directors and partners at a firm, as well as those performing compliance and oversight roles.
Kelly says: “These individuals are being held personally accountable for any failure of the firm’s systems and controls within their remit.”
As a result, Bankhall is recommending that firms take appropriate measures to protect themselves, such as having controls in place to help them demonstrate how and by whom the firm is being managed, and its plans and progress with regard to the Retail Distribution Review.
Bankhall is also highlighting recruitment processes as another area where advisers need to tread carefully.
It says this is particularly relevant for larger firms who need to ensure the right individual is recruited for any positions of influence, as in some recent cases the FSA has claimed the recruitment process at some firms is not effective enough to ensure the individual can fully demonstrate competency and capability, and is therefore a fit and proper person for the role.