FSA urges brokers to take legal advise over legality of non-statutory trust accounts
The FSA has urged Scottish brokers to take legal advice to ensure the legality of their non-statutory trust accounts.
The move follows an investigation by the FSA which found that the majority of Scottish brokers operating non-statutory trust accounts were unaware of the legal steps needed to create these accounts.
Insurance Times revealed last month (News, 26 April) that the FSA was to investigate whether non-statutory trust accounts had been properly constituted under Scottish law.
It followed concern from brokers that they had been unable to set up the non-statutory trust accounts under Scottish law, potentially leaving client money unprotected.
Brokers claimed insurers did not recognise the different legal framework in Scotland.
The FSA said it would now urge brokers to take legal advice to ensure their trust accounts were properly constituted.
An FSA spokesman said: "We have contacted most of the brokers who used non-statutory trust accounts. Most were not aware of the issue.
He said the FSA would promote the issue on its website and briefing documents.
According to the FSA, 10% of Scottish brokers holding client money use non-statutory trust accounts.
Under Scottish law, brokers must change their agency terms with each insurer to create a non-statutory trust.