Will your business hold up to scrutiny if the FSA makes an impromptu visit this month, asks John Quigley
Will the FSA visit brokers before authorisation? From the beginning of 2004 I have warned brokers that this is in fact a very real possibility, even a likelihood. Many firms have taken this onboard and have acted accordingly; but others have dismissed the idea as fanciful.
My best advice is that visits to a selection of firms should be anticipated, and that such visits will take place during September, October and November 2004.
The FSA will not be able to visit every high street broker and targeting in this group is likely to be driven by data records and the application content. But the situation is
different for London market brokers. These are being dealt with by a dedicated team in the FSA, which certainly has the resources at hand to visit every firm in a short space of time. This is not to say it will visit everyone, just that it has the capability and is very likely to visit those that catch its eye.
Only the foolish or ill informed would say that the FSA could not or will not visit every Lloyd's broker before authorisation because it does not have the resources. The FSA has access to resources that will flex to meet need and demand.
Applicants that submit coherent and convincing plans, addressing all the issues that the FSA has identified, are less likely to attract attention. Applicants that set off alarm bells will receive special attention. The expectation, assuming the quality of submissions is generally of a high standard, is that the FSA will visit:
a) some firms that it feels have first class arrangements in place, in order to see these arrangements in place for themselves and increase their understanding of the market; and b) those that are of concern to the FSA.
As evidence of this the first of these visits has been carried out in past weeks on a well-respected Lloyd's broker.
As a medium-sized broker this firm covers many, if not all, classes of business, and doubtless has an element of retail business in its portfolio. This will have made them interesting for the FSA to look at to see how the systems and controls described are implemented to achieve the required goals.
The style of the FSA visit appears to have been in accordance with expectations, being interview-based and requiring individual and unprepared time with chief executive, financial director, compliance officer, human resources director and non-executive director. But at this stage not interviewing more junior staff.
A firm and its team should now reflect on whether they are prepared for face-to-face discussions with FSA representatives in the very near future.
If the FSA asks questions of your firm you must have confidence that the firm firstly understands the question and secondly that it can provide a compliant response and evidence of the steps being taken to achieve this.
It is imperative that your team ensures the tasks committed to in the regulatory business plan and compliance monitoring plan are in train and completed according to schedule. Senior staff must also be suitably acquainted with FSA principles and threshold conditions.
All senior members of staff must not only accept and adopt the changes, but must be seen to understand and embrace the new status quo as an opportunity that their team is taking advantage of.
Leadership in these matters must be seen to come from the top.
