IFAs must address their shortcomings on Treating Customers Fairly (TCF) promptly and inform the Financial Services Authority (FSA) of their progress, according to Clive Briault, FSA managing director of retail markets.
Speaking to the industry in London yesterday, Briault said: “I want firms to be clear that we are very unlikely to consider enforcement action if a firm has properly considered whether it is treating its customers fairly and has embarked in reasonable time on a plan of action that effectively addresses any identified shortcomings.”
Robin Gordon-Walker, press officer at the FSA, says a “reasonable time” depends on the particular circumstances and the scale of the problem. For example, training a sales force of a large insurance company on TCF can take a long time so senior management need to act early.
However, in general, Gordon-Walker says once a problem is identified senior management should promptly inform the FSA, explain what they are doing to redress it and give progress reports.
Briault says the FSA is building TCF into Arrow – its core risk assessment and risk mitigation process. He said: “Supervisors will be looking at the approach that a firm has taken to treating its consumers fairly, including both the initial ‘gap analysis’ and subsequent actions to address any resulting issues.”
The essence of what the FSA is trying to do is “put yourself in the place of your customers and consider very carefully whether you would regard yourself as being treated fairly by your firm”, he added.
If a firm does not take its TCF obligations seriously, is short of meeting good practice standards and as a result carries the risk or the actuality of significant consumer detriment, Briault says, the FSA “will most certainly consider taking enforcement action against such a firm”.
Gordon-Walker says enforcement action is the FSA’s last regulatory tool and if firms instantly identify problems and try to mitigate them early it is unlikely to be used.
Briault stated the FSA is “working on ways to make sure that our staff are properly trained and able to take a consistent view on what treating customers fairly means”.
Gordon-Walker admits this is important because FSA staff are used to working on detailed regulations so learning TCF will be a challenge.
Training will probably consist of internal seminars and external coaching, with the input of the Practitioner and Consumer Panels and TCF Consultative Group.
The FSA also wants firms to "alert us if our staff do not perform accordingly," said Briault.
Tthis is unlikely to consist of filling in a form but will be a more informal, general feedback for example at conferences of senior management, says Gordon-Walker.
Briault also tried to dispel some of the myths about TCF yesterday and said:
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