A structured approach is key to becoming compliant, say John Quigley and Joe Egerton
Lodging application forms for FSA authorisation is just the easy part. The next step is the hard part. From now until January 2005, it is white-water rafting all the way. To keep on course and off the rocks, everyone needs to paddle together as hard as they can in the right direction.
First, make sure everyone understands the seriousness of the commitments made by the directors in your application, what the timetable is and the urgency involved - break it down into weeks. This is a team effort and everyone needs to be onside from the outset.
Second, scrutinise your project plan, the compliance monitoring plan, and all commitments to actions you have made. Lay them out in a single task list, allocating the task to an owner and resource, with delivery requirements and delivery deadlines. Include review dates to ensure the tasks will be completed on time. Do not accept overrun or extensions. Have an independent review of these arrangements carried out. This can be performed by experienced non-executive directors, but more likely by independent third party experts.
Remember, the process is one of self-certification. When a firm states that it will comply with a particular set of FSA rules (for example training and competence) it is not expressing a wish or hope, but is promising to invest the time and money needed to comply with these undertakings by 14 January 2005.
The FSA's chief executive has made it clear that the FSA expects that boards will not be too large to be effective and that committee structures will ensure key issues are properly addressed. There must also be effective non-executive presence. Firms will need to demonstrate both that they have appropriate non-executive directors and that these will be empowered to act effectively. Where a board's size has been slimmed down, every effort must be made by the rest of the team to provide support and embrace the new structure to ensure that it is effective.
Systems and controls must be tested. Do reporting lines work? And do responsibilities lie with the right people? Also ensure that staff understand what has been put in place and what is expected of them.
Training and competence assessment programmes are another key aspect. This is high on the FSA's attention list and easy for it to check. If you do not have the answers, skills or resource, get external help.
Larger firms must have a complaints handling procedure in place. The time limits for replying to complaints will become operative on 14 January 2005, so in practice you should plan to operate compliant processes for dealing with complaints from 1 November at the latest - otherwise you may find yourselves faced with complaints to the ombudsman based on a failure to reply in a timely manner.
Procedures manuals for all parts of the business must be reviewed and in place, having been updated to become FSA compliant. You will need to make access to the most recent version easy for all staff and ensure that they have read and understand the contents. This includes the chairman and senior directors.
Finally, a 'minded to authorise' letter is no guarantee that the FSA will not make a check. If the FSA finds material failings in a firm's arrangements, it may become 'minded not to authorise'.
