A leading firm of accountants has been fined over regulation failures. This is a warning to all brokers, says Joe Egerton
The FSA has fined Deloitte & Touche Wealth Management Ltd £750,000 over failures in its approach to regulation.
Brokers applying for authorisation from the FSA should pay particular attention to two of the charges which Deloittes accepted.
First, the FSA fined the company for failing to implement a training and competence (T&C) programme that adequately ensured that all of its advisers complied with the PIA rules relating to the documentary requirements of giving investment advice and keeping relevant records.
Brokers will need to ensure that by 15 January 2005 they have implemented a T&C programme that enables everyone dealing with clients to comply with the documentary and record keeping requirements of ICOB.
Second, the FSA fined Deloittes because it asked the regulator to grant approved person status to an individual in a senior position who had proposed a course of conduct which might have misled the regulator had it been carried out.
The final notice accompanying this fine emphasises the importance the FSA attaches both to implementing key programmes and to being open and honest with it.
Brokers applying for authorisation will have to sign a declaration that they will comply with the T&C requirements of the FSA by January 2005. The FSA has sent the clearest possible signal - by a fine on the regulated arm of a major accountant - that it will not tolerate failure to implement training and competence programmes.
There is also a clear message that even contemplating misleading the FSA is a serious offence. Brokers will have to take firm action - in the form of discipline and remedial training - for any senior employee who has proposed making any misleading statement in the application for authorisation.
Brokers will also have to disclose both the suggestion and the remedial training to the FSA if they wish to apply for approval for the individual who proposed misleading the FSA.
Any firm that wishes to put an employee who has proposed misleading the FSA up for approval must answer "no" to question 40 on FSA Form HSF2, and provide a supplementary information sheet.
Applicants and candidates should assume that the FSA would see any email or internal memorandum that contains a suggestion of misleading the FSA. Such documents have a habit of surfacing.
The FSA's regulatory decisions committee is sharply critical of those who fail to make disclosure on applying to the FSA. However, both the committee and the FSA executive understand that individuals do things they later regret, and repentance, accompanied when needed by training, is often seen as positive.
Failure to disclose an episode is seen by the FSA as a signal that the candidate is not fit and proper and invariably leads to searching questions being asked both of the candidate and the applicant firm.
Joe Egerton is principal adviser on FSA regulation and ethics to D3 Group