FSA findings likely to add weight to calls for simpler rules
The FSA's review of brokers' compliance with client money rules, has found significant failings among smaller firms, Insurance Times has learned.
Last August, the FSA began a review into the "worrying" levels of non-compliance by brokers with the client money rules. Over 200 wholesale and retail brokers were targeted.
Sources close to the FSA said the reviews, which were completed at the end of 2006, had found continual breaches of the client money rules, particularly among smaller brokers.
The findings are likely to lead to a wave of enforcement actions against brokers and have added weight to calls for the rules to be simplified.
Lack of resources and inadequate understanding of the complexities of the rules are seen as key reasons why many firms are not compliant.
An FSA spokesman would not comment on the review's findings, the results of which will be published in March.
The revelations came as a senior FSA official slammed brokers for their continued "systematic and deliberate breaches" of the regulations.
Dr Thomas Huertas, director of the FSA's wholesale firms division, highlighted non-compliance with client money rules. He said some brokers treated client money as "just another form of working capital" while others had "severe deficits" in their client money accounts.
Compliance expert Alex Peterkin, of FSA Solutions, said: "There are many reasons why brokers may fall foul of the client money rules. Some brokers rely heavily on their book-keepers or accountants, and as the rules are very complex the understanding isn't as good as it could be, leading to breaches. Simplifying the rules would do much [to help]."
The FSA has pledged to examine the case for "clarification" of the client money rules in response to the Davidson review on 'gold-plating'. It called for the simplification of the rules.
