The U.K. Financial Services Authority plans to review how brokers handle clients’ money. The review, which will scrutinize more than 200 wholesale and retail intermediaries, will take place later this year.
The announcement follows several pilot studies that the FSA says reveal a worrying level of failure by brokers to follow FSA rules on client money. The authority has already referred several firms to enforcement for possible breaches of client money rules and inability or unwillingness to take corrective action.
Julian Adams, head of wholesale insurance firms at the FSA, said in a statement: “We will consider taking enforcement action against any firm, where we see wilful non-compliance or an inability to handle customer’s money in line with our requirements.”
Some of the problems identified include a failure to keep track of client money held with third parties, a failure to perform client money calculation or doing so incorrectly, a failure to observe trust law and a failure to keep customers informed about how their money is being handled.
The FSA has published a Guide to Client Money, which gives details of what is expected from firms and how to do that. The British Insurance Brokers’ Association welcomed the move.
“The client money rules are extremely complex so it comes as no surprise to find some people struggling. Guidance in the form of this booklet is very welcome,” says Branko Bjelobaba, a compliance consultant for BIBA. “It is no good for anyone if a broker is mishandling client money. BIBA advocates full compliance with the FSA.”
Ensuring clients’ assets are adequately protected is a requirement under the FSA’s principles for businesses. The authority hopes that by undertaking the review, it will see an improvement in the way firms handle client money.