RESPONDING TO THE FSA

Many of the issues identified by the FSA during the course of their Small Firms regional assessments and thematic visits have a common root cause, the lack of adequate documented systems and controls.

The common failing of lack of adequate documentation prevents firms from demonstrating to the FSA that they have sufficient control of their business, are able to identify issues of poor practice at an early stage and can prevent situations of potential customer detriment arising.

It may well be that the operating practices of a firm are in compliance with FSA requirements but simply cannot be demonstrated, either through lack of documentation or poor record keeping.

Telos can help intermediary firms in a number of ways:

Pre visit review and healthcheck

Whether an intermediary firm is aware that they are to be visited by the FSA or simply wants to ensure they meet the current requirements, the Telos Compliance service can help.

We will review the existing operating processes, systems, controls and documentation to establish any shortfall in relation to current FSA expectations. Our report will make recommendations as to how any shortfall could be addressed and how the documentation should be presented. Typically the information required exists but is not readily available or obvious. By putting all of the documentation into a standard and logical format the FSA should be able to understand the way the intermediary operates and have confidence that they have control of their business. Engagement in this way also demonstrate the desired management behaviours the FSA expects.

In addition a sample review of sales can be undertaken to highlight potential areas of weakness with regards to Quality of Advice and Treating Customers Fairly (TCF). Where weaknesses are identified recommendations will be made. By following through on the recommendations the intermediary will be able to demonstrate to the FSA that they are proactive in assessing the risks to their business, have commenced remedial action to assess any past customer detriment and made changes to their operating practices to limit any potential future risks.

If the FSA visit and are presented with a comprehensive record of systems and controls, the output of a sample review and activity commenced to correct any weaknesses their response is likely to be of a lighter touch than where they uncover these weaknesses through their own review. This situation is preferable to the FSA identifying any weaknesses and requiring the firm to engage a Skilled Person, suspend activities until completion of the review or even putting the business into enforcement.

Remedial Action Plan

Where weaknesses are identified, either through a Telos healthcheck or an FSA visit, it is important that an appropriate Remedial Action Plan is put into place to remedy them. The action plan will have to demonstrate the changes to operating practices systems and controls that will ensure future business is transacted in accordance with FSA requirements. It should also be remembered that the current standard of systems and controls is under consultation. In addition it will often be necessary to review the customer impact of any historic failings.

Telos have substantial experience in understanding how best to implement such plans taking into account both the FSA's requirements and the day to day impact on the intermediary. It is worth noting that early implementation of a Remedial Action Plan can often reduce the scale of any action taken by the FSA.

Each Remedial Action Plan is structured to meet the needs of the firm or the requirements of the FSA and may include some or all of the following:

Structured changes to the sales process
Training and accreditation of advisers in the revised sales process
Revision and improvements to the record keeping systems
Overhaul of compliance systems and controls
Sample review of historical sales to assess potential customer detriment
A period of monitoring of new sales to validate the implementation of new processes
A 6 month assessment of the implementation of all changes

Telos senior consultants are specialist in identifying and delivering mortgage and general insurance remedial work.

For more information on using a compliance consultancy the following orgainsations have useful information

FSA - Using a compliance consultant
APCC - Appointing a consultant
AIFA - Directory of compliance services
AMI - Useful FSA links