With yet another broker banned by the FSA, it’s time to go back to the sourcebooks
On 2 September, the FSA banned insurance broker David Marriott for persistent misuse of clients’ money. It stated that he had gone far beyond technical breaches of the client money rules and that his standards of integrity – he continued to use client funds and continued trading while insolvent – had fallen well short of what is required.
Have clients been exposed, or have the insurers who provided risk transfer to his two brokerages lost out? Perhaps we will never know.
The FSA is well aware that technical breaches of rules do occur. It knows that sometimes these are down to innocent mistakes and that nobody is in danger.
However, individuals in this position need to learn from their errors, make good, move on and sin no further!
Very few individuals actually intend to commit offences. But as any good lawyer will tell you, intentional or accidental can mean much the same thing. After all, we are dealing with statutory law: the Financial Services and Markets Act 2000.
The main reasons behind a rule breach, then, are: lack of competence and capability, lack of honesty and integrity, wilfulness, apathy, misunderstanding and non-engagement.
Despite the FSA having been with us for five and a half years, I still see many firms whose understanding of Cass, Cond and Mipru (the sourcebooks on client assets, threshold conditions and the Prudential sourcebook for mortage and insurance intermediaries) is not thorough enough.
The FSA itself has published lots of help online, which is easy to read and understand, unlike the sourcebooks. Biba has also done a huge amount of work in this area, and its compliance manual makes things simple.
Apathy or lack of competence and capability is fully understood. People’s behaviour and motivation drive many aspects of non-compliance. Some people assume they have risk transfer with all insurers and wholesalers, but they’ve never read their terms of the business agreement.
Cass imposes specific and measurable requirements: you need to know what is needed of you and simply do it. Well-run companies have had this as a feature of their business since day one: good controls, governance, compliance and TCF (treating customers fairly).
For those companies that have not prioritised this, be warned. The FSA has established a new unit to enhance and strengthen its capabilities in the area of client money and assets. This consists of teams responsible for specialist supervision, policy, data analysis and risk management, and they are out in the field looking at what insurance brokers do when it comes to Cass compliance. Your house has to be in order.
Do insurers have a role to play? Yes indeed! They should help their own staff understand what is required. Many brokers tell me that their account handlers simply don’t have a clue. The FSA affects insurers too, and those insurance staff who talk to brokers should have a good understanding of all material matters affecting brokers. IT
Branko Bjelobaba FCII is managing director of compliance consultancy Branko
