The Financial Services Authority has issued a factsheet calling for an improvement by retail networks in their supervision of Appointed Representatives after a survey found potential shortcomings.
The factsheet – Controlling Appointed Representatives: Factsheet for General Insurance, Mortgage and Investment Networks – suggests networks can improve in three main areas:
- compliance and the approach taken to supervising ARs;
- admission to membership, and
- documented procedures and management information.
The FSA says the factsheet also applies to firms who appoint ARs but do not meet the definition of a network.
In the area of compliance, the factsheet states 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.
Furthermore, firms should ensure their procedures relating to the monitoring and approval of financial promotions remain effective, suggests the FSA.
Before registering an AR, the factsheet says Principals must 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.
The FSA also says it 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, varying in size from 10 to nearly 850 ARs, and found potential shortcomings in the following areas:
- 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 operate a risk-based approach to monitoring ARs.
Alison Hewitt, head of department in the 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.”
But, she adds the FSA will be carrying out further work next year to monitor the position and will take appropriate action where concerns remain.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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