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Hot Topics and Key Areas of Expertise

Treating Customers Fairly

FSA's retail regulatory agenda aims to ensure an efficient and effective market and thereby help consumers achieve a fair deal.  TCF will be embedded into ARROW and firms' compliance with the December deadline will be assessed by using ARROW – it will become an integral part of regular assessments of relationship managed firms; and the progress of small firms will be assessed via the three-year regional assessment programme.

  • Are you achieving positive outcomes for Consumers?
  • Have senior management instilled the right culture?
  • Is consumer feedback actively sought and acted upon?
  • Do you have any serious failings that could jeopardise your compliance with TCF?

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Annual Compliance Reviews

The FSA handbook requires firms to take reasonable care to establish and maintain systems and controls as are appropriate to its business.  This includes establishing, implementing and maintaining adequate policies and procedures sufficient to ensure compliance.

  • Are your policies and procedures reviewed annually and is there a process in place to ensure that your firm's policies receive appropriate senior management sign off?
  • As a key focus for the FSA, how satisfied are you with the quality of advice provided by your firm?
  • Have you policies and procedures been independently reviewed to ensure compliance and that they are aligned with industry best practice?

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Complaints Management

The proper handling of complaints is a key regulatory requirement and central to FSA's Treating Customers Fairly initiative.  The fair and timely handling of complaints is not just a regulatory requirement; it is also good business and may well help in reducing customer attrition.

  • Are complaints adequately investigated and dealt with in a timely manner?
  • Is appropriate root cause analysis undertaken to prevent future complaints?
  • Are you achieving positive outcomes for Consumers?
  • Are you doing everything possible to prevent complaints being referred to the Financial Ombudsman Service?

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Past Business Reviews

Past Business Reviews are normally undertaken under the watchful eye of the regulator with the prospect of enforcement action not far way.  Fairway's experience and expertise in dealing with past business suitability reviews, EB20 adviser reviews and remediation projects is second to none.  Fairway provides an independent approach to remediation reviews which balances business and regulatory expectations.

We have experience of remediation reviews across a number of products including: Pensions, Mortgage Endowments, Precipice Bonds and With Profit Bonds.

  • Have you specifically identified the issue that requires remediation?
  • Have you identified the total customers to be remediated and has this been verified?

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Training & Competence

Recent industry failings have focussed FSA's attention on the Approved Persons regime, particularly in relation to the competence of firm's management.  This is particularly true for small firms where it is arguably easier to demonstrate a close link between management and any misconduct.

Ongoing concerns over the quality of advice have given rise to major changes and challenges for the industry.  The Retail Distribution Review (RDR) seeks to fundamentally change the way the UK market is structured and operates.

  • Is your business model prepared for the changes ahead?
  • Are your advisers working towards enhancing their qualifications?

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Anti-Money Laundering

The reduction of financial crime has always been one of the FSA's statutory objectives.  There has been significant increase in focus from the FSA in Sanctions and Fraud but AML compliance remains a key area.

Recent fines suggest that the regulator is also targeting firms MLRO's where compliance failings relating to financial crime are identified.

  • Are your AML systems and controls adequate and fit for purpose?
  • Are staff and senior management aware of their responsibilities?
  • Does your MLRO report reflect FSA guidance and does it provide an adequate level of analysis of your firm's compliance?  Is your MLRO report discussed by senior management and recommendations acted upon?

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Sanctions Compliance

The use of Financial Sanctions has risen rapidly up the regulatory agenda.  It is important that firms understand their responsibilities and have appropriate procedures to prevent transactions being carried out with prohibited persons or organisations.

The recent review by the FSA found that there were inadequacies in firms' compliance with the financial sanctions regime.

  • Are you screening against the HMT list both at client take on and on an ongoing basis?
  • Do you have adequate procedures in place to deal with PEPs?
  • Are all staff aware of their responsibilities?

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ARROW visits and RMPs

ARROW II is FSA's operating framework by which they will identify risk posed by firms to the four statutory objectives.  It is important to be adequately prepared for an ARROW visit as this will shape your relationship with the FSA for the next 18 months to 3 years (depending on the size of the firm).  Senior management will need to have a clear grasp of the risks inherent in their business and have a detailed action plan to address any known issues.

  • Have you identified all the risks to your business based on industry hot topics and firm specific issues?
  • Are your senior management adequately prepared for the ARROW visit?

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Engagement with the FSA

Firms have a duty to be 'open and honest' with the regulator.  You should be aware also that your interaction with the FSA and more importantly, their perception of your firm, will define your relationship and the level of engagement. 

FSA has publicly stated that it will be adopting a more direct and intrusive approach to supervision.  In addition, where FSA's has concerns over issues such as; the level of a firms compliance, its ability to meet the requirements of any Risk Mitigation Programme or concerns over the competence of a firms management, the level of FSA engagement will increase.

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