Biba blog: the FSA gets it right

There’s not much that the Financial Services Authority has been lauded for lately, but credit where credit is due on this occasion. Before I’m lynched for gross toadying, hear me out. Why am I being effusive? Reform of the FSA’s client money rules and, more specifically, the manner in which the regulator has been conducting discussions with Biba’s membership about proposed changes, that’s why. 

No matter how hard you try to dress it up, client money is not the sexiest of subjects, despite being an essential protection for the customer. Many general insurance intermediaries have tied themselves in knots trying to comply with the rules governing client money since their introduction in 2005. More than 40 pages of FSA guidance provide ample proof that the existing client money rules for general insurance intermediaries are difficult to understand.  

Hence the reason why Biba is so pleased that the FSA is looking again at the rules to make them easier to comprehend. Even more so that the regulator did away with the publication of a discussion paper on client money reform planned for earlier this year, deciding instead to undertake further pre-consultation work with brokers face-to-face. 

This has involved the FSA’s client money policy team visiting ten of Biba’s regional compliance forums around the country this spring to meet with members to discuss their ideas for reform. That’s a lot of time away from desks when resources at the regulator are fully stretched.

It’s important that brokers are given the opportunity to hear what the FSA is planning, determine the implications of those changes for their businesses, and challenge the thinking behind those plans. This willingness to engage with brokers means more than 300 different firms, from the largest insurance and reinsurance brokers to the smallest, have had the opportunity to speak directly to the regulator about the plans. That’s far more feedback than any paper-based discussion exercise about this subject would ever have garnered.

This interaction between the industry and the regulator is invaluable and refreshing. We know that some of the FSA’s thinking in this area has evolved since its first discussions began with Biba members in February, and will no doubt continue to do so until the consultation paper is published. 

Hopefully, this willingness to engage with brokers is a sign of good things to come and that the industry can expect to deal with the new Financial Conduct Authority in a similarly open and co-operative vein. 

We’ve learned much during this journey, not least that the FSA has a plain English department (something of a surprise to many of our members too). The new client money rules will be making their way through that department to ensure their clarity. That just leaves the FSA’s lawyers, with whom we can but hope that this new drive for comprehensibility does not fall at the final hurdle and that the proposed rules emerge free from legalese ready for industry consultation later this year.

Vanessa Young is London Market Secretariat and Compliance Co-ordinator, Biba.