Insurance: FSA to come knocking
That rat-a-tat-tatting on your door is the man from the Financial Services Authority, as it starts follow up visits to insurance brokers and investment firms that hold clients' money or assets.
In March last year, the FSA wrote to the compliance officers many insurance brokers and investment firms that hold clients' money and assets reminding them of the obligations in relation to such money or assets.
And then it went on a round of inspections. It was not best pleased with what it found.
Yesterday, the FSA announced that it had written again, this time to the CEOs of such entities, sending a copy of its report which detailed the problems uncovered by the inspections.
These include:
- poor management supervision and control;
- lack of establishment of trust status for segregated accounts;
- unclear arrangements for the segregation and diversification of clients’ money; and
- incomplete or inaccurate records, accounts and reconciliations.
Action has been taken against several of the firms visted: two have been referred for enforcement, one has had its assets frozen and several have been told to commission "skilled person reports."
Industry notice boards have seen considerable activity in the past year as affected companies have tried to work out their obligations.
The new letter to the CEO is likely to increase that concern. The letter signed by Sally Dewar, Managing Director, Risk with the FSA offers no comfort. The FSA is, she says "intensive supervision will persist and we will continue to take action where we believe that client assets are not sufficiently protected.
It's not rocket science: other professions have had segregated clients' accounts for, well, in some cases since their profession was formed. All the brokers have to do is go to their bank and ask for help in setting up something similar to a solicitors' clients' account. And then find an accountant familiar with solicitors' accounts to ensure compliance. For sure, there are some differences - but things like unallocated balances in clients' accounts, one of the FSA's particular bugbears, should never happen.
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