We’re back in control, says Biba, as regulator backs down and accepts industry-led solution
The FSA has accepted an industry-led solution for brokers’ commission disclosure.
The regulator has backed down from its threat of ordering compulsory disclosure and has given the market the chance to prove it can work under industry guidelines.
The FSA said it would use the next 18 months to two years to assess whether brokers have adhered to its five outcomes for disclosure (listed below). The regulator will report again in 2010 at the earliest.
It is now thought the FSA could turn its attention to managing general agents (MGAs).
In the feedback statement for its discussion paper, the regulator said: “Within the context of our regulatory framework ... we will continue to maintain close supervisory attention of those business models where we consider the potential for conflicts of interest to be greater; for example, firms with managing general agency arrangements.”
Ed Harley, head of retail policy and financial promotions at the FSA, told Insurance Times the regulator was aware of the changes businesses were making in how they developed certain models, such as MGAs.
“We always want to keep abreast of the latest developments and we have always watched closely how certain business models are developing,” he said.
He said the FSA would set out its priorities in its 2009 business plan, which will be published in February.
Biba, which has led the brokers’ campaign against commission disclosure, is close to submitting the final industry guidelines, which will put more emphasis on giving customers the right to ask how much commission their broker is earning.
It is believed the FSA will approve these in the first quarter of next year.
Steve White, Biba’s head of compliance and training, said brokers were back in control, but it was up to them to make sure they followed the guidelines.
“It is the last chance saloon,” he said. “The ball is now in our court but we have to keep hold of it. It is not the end, it is a new beginning.”
Brokers may have to tell customers verbally or in a written document that they have the right to know how much commission they earn .
Next year, Biba is planning a host of training events around the country to help brokers take on board the new guidance.
CUSTOMERS SHOULD KNOW
1 The commissions intermediaries receive
2 The services intermediaries are providing
3 The capacity in which an intermediary is acting
4 Their right to request commission information
5 If there is a chain of intermediaries.