Co-operation with the FSA is vital and good record-keeping will help, says Harriet Quiney
Experience from the IFA sector shows that one of the key lessons to be learned is the necessity of maintaining a good relationship with the regulator.
The FSA requires firms to deal with the regulator in an "open and cooperative" way, and places great emphasis on this. It has limited resources and will therefore give credit to anyone who assists in notifying and unravelling potential misconduct. It will look at a number of factors, including:
In some cases co-operation has meant that matters have not proceeded to enforcement. Where they do, FSA final notices state repeatedly that fines would have been more substantial but for the firms' co-operation and ready agreement to compensate investors.
The other key lesson to be learned from IFAs' experiences is the importance of keeping good records. It is not enough merely to write things down: records must be kept in a systematic way so that they can be found quickly.
The FSA's record-keeping requirements state that a record will be "readily accessible" and be available for inspection within two business days of a request being made. Files must also demonstrate that appropriate status disclosure was made.
Experience shows that in both enforcement investigations and ombudsman complaints, firms have been let down by poor record keeping. The lesson to be learned is that it is not enough to give good advice, you have to be able to demonstrate that your advice was good.
Relying on memory is contrary to FSA rules and, if the dispute turns on who said what and when, the presumption will be that the customer has the better recollection. The FSA's view is that the customer will only talk to a limited number of intermediaries, whereas intermediaries will talk to a large number of customers.
While the rules specify that records need be kept for three years, they suggest that firms should consider retaining records for longer in case customers complain or take legal action, such as when claims might arise under an employers' liability policy.
A firm will only be as good as its records demonstrate that it was and sloppy record keeping is likely to lead to adverse decisions.