Large brokers warned they face 'serious scrutiny' amid FCA wholesale probe

Large brokers should expect ’serious scrutiny’ from the FCA in its probe into wholesale broking.

The FCA wants to understand large brokers’ potential conflict of interests, whether they are using their bargaining power to get clients a good deal and how their behaviour affects competition.

“This marks the beginning of a potentially long examination of the market by the FCA with promises to gather data and information, engage in discussion, carry out roundtables and research to make sure competition is working effectively,” said Pinsent Masons Nick Bradley.

“An interim report is expected one year from now therefore large broker practices in the wholesale market can expect to be under serious scrutiny in the year ahead.”

The FCA will focus on the impact of data services and analysis provided to insurers, product design and selection of insurers, and finally, facilities.

Bradley said the facilities arrangements would come under particular attention. 

”It is concerned that large brokers may be exerting market power to oblige insurers to sign up for facilities; that conflicts of interest may be coming up because of the higher commissions some facilities can attract; and that broker conduct may be compromised if smaller underwriters are being squeezed out because risks are not being placed on the open market,” he said.

Compliance expert Branko Bjelobaba said: ”The London Market review will be far-reaching and the scoping document is
first class and gives firms a very clear heads-up as to what the FCA want to check.”