Alex Peterkin urges brokers to be sure they will be compliant before signing their form
When completing the form, firms should be alert to the commitment that they are giving: to be compliant from the authorisation date. The remaining questions in HSF1 deal with how much and how you would like to pay for the process to begin. Remember, the service is very much money up front: no fee, no completed form.
After that there will just be the HFS2 forms to be completed and then checked pre submission. These forms are fairly straightforward. Once you have the data to respond, completing them should be fairly quick.
For firms with less than a £1m of brokerage turnover, the completion and validation should probably take about a day to two days to complete depending on the amount of initial preparation that has been done. Working out the project plan and timeline by which you can achieve compliance in line with your commitments will take a little longer. It's probably at this stage that some firms may take the view that if they submit the forms and get authorised they may get away with not being compliant.
While only a fool would guarantee that you wouldn't be caught in the act, there are longer term traps into which the non-compliant firm will always fall and at least increase the risk of FSA review. Those firms who are planning to be in business for the longer term should pay heed as firms could end up paying more in the longer term if they want to stay in business than they would by making the effort now.
Firms whose turnover exceeds the £1m level will have yet two further appendices that will need to be completed in the form of Annex 1 and Annex 2. No simple Annex completion exercise here as the FSA seeks to collect further information to work out the risk rating of your firm.
HSF Annex 1 deals with business plans, compliance arrangements and their project plan to reach compliance by 2005, and details of complaints handling procedures. All will help gain background information on the firm itself and potentially differentiate your firm for further questions, issues or clarification.
HSF Annex 2 requires even further information on the operations of the business. Confirmations are required that will have to be issued with a caveat if an early application is to be made. This will immediately prompt further questions unless the information has been structured to provide answers to the possible questions. The use of IT and the complexity of the systems are also assessed, together with extra information on upgrade plans and control over the operations. Add to this the need to obtain either an audit or reporting accountants report that the information disclosed in HSF2 Annex 2 is correct and things begin to get a little interesting.
It remains to be seen whether this reporting accountant sign-off will be strictly enforced. If it is, there will be lots to learn, not only for brokers, but also for their auditors and reporting accountants, before the forms can be submitted.
We would encourage all brokers to take maximum advantage of the one-day courses that will be run by Biba across the UK in February. All Biba members will receive invitations to these events and information can also be found on the members-only section of the Biba website or by contacting Biba's training department on 020 7623 9043.