Michael Faulkner - Exclusive
The FSA is set to begin a crackdown on the handling of client money by retail brokers next month.
The move follows the regulator's review of the wholesale broker market in which it found widespread non-compliance with the client money rules by Lloyd's and London market brokers.
As a result, wholesale brokers were given a one-month deadline to rectify problems in a 'Dear Ceo' letter.
The FSA confirmed that a thematic review of the retail market would begin within weeks. A spokesman said: "We will extend similar work [to that conducted in the wholesale market on client money handling] to the retail market in September.
"We have identified the need to look into the retail market but we are not pre-judging the outcome, which should be out by the end of the year or early next year."
Compliance experts warned that the FSA could take a tough line with non-compliant brokers.
Biba regulation and compliance manger Steve White said the FSA had sent out copies of the wholesale broker 'Dear Ceo' letter to some retail firms and would expect them to have taken note of it.
"I am not at all surprised that the FSA is doing this and would expect it to uncover similar issues as discovered in the retail market. It's possible the FSA could come down harder on these firms as they have had a pre-warning."
The FSA's thematice review could encompass face-to-face visits with brokers and requests for documentation.
White urged brokers to look at the 'Dear Ceo' letter sent to wholesale brokers and look to see if their systems and processes show any of the flaws identified by the FSA.
