2. Client Money for General Insurance Intermediaries

A must read for all Compliance Officers, Accounts Departments, Audit Departments, Chief Executive Officers, Directors and the firm's external Accountants

Client Money and compliance with the CASS rules remain a high priority for the FSA. To assist firms in their understanding of the Client Money rules and to aid their compliance, the FSA has published a

Guide to Client Money for General Insurance Intermediaries. It is available to download from the FSA's website at www.fsa.gov.uk/pubs/other/Client_Money_Guide.pdf

It is important to:

Read the Guide; Review your Client Money procedures in light of the Guide's content; an Notify the FSA of any breaches of the Client Money rules.

Why is it important?
Because the FSA on recent visits to firms has identified that Firms are not aware of client money audit requirements, such as:

Firms failing to perform the client money calculation correctly, Firms failing to record money held at third parties, Firms failing to make adequate disclosures to customers

Wilmslow Consulting Ltd will be happy to provide ongoing guidance on this issue. Call David Evans on 01625 525580 Wilmslow.consulting@ntlworld.com

3. Conflict of Interest

It is senior management's responsibilities to implement appropriate processes to enable the firm to manage conflicts of interest effectively.
The FSA have issued some observations that it suggests firms might consider their appropriateness, in light of their own circumstances.
These observations are made as a series of questions under four headings, as follows:

Senior management should be engaged fully in all aspects of conflicts identification. Senior management should take a holistic review of conflicts management. Senior management should review the performance of conflicts mitigation strategies. Senior management should have policies and practices in place for compensation and training and a firm's culture should support conflict management and mitigation.

In other words it is the Financial Services Authorities' view that it is senior management's responsibility to manage conflict of interest effectively on an ongoing basis

Wilmslow Consulting Ltd will be happy to provide ongoing guidance on this issue. Call David Evans on 01625 525580 Wilmslow.consulting@ntlworld.com

4. FSA Compliance - How Effective is your Compliance regime?

Please take some time to answer the following questions

Is your firm's compliance manual and T&C Scheme tailored to your firm's operations, up-to-date and understood by all staff? Yes No Are your firm's operational procedures clearly documented and linked to the requirements of the regulator's rules? Yes No Is your firm's compliance monitoring programme risk-based and all embracing? Yes No Is your firm's compliance monitoring programme properly implemented and reported? Yes No Are issues identified either by your compliance staff or others correctly and satisfactorily resolved? Yes No Is your firm's reporting chain and relationship with the compliance staff effective? Yes No Are any rule breaches and complaints being properly identified and resolved? Yes No Does your compliance staff have the appropriate experience? Yes No Are there dedicated compliance resources and are they adequate? Yes No Is there regular training about compliance for all your staff? Yes No Are you ready for an FSA Arrow visit? Yes No Have you appropriate Management Systems and Controls in place to meet the firm's and FSA's requirements? Yes No

If you answer No to any of the above questions you may require assistance with your FSA compliance. Even if you answer Yes to any or all of the above questions you may still require assistance with verifying your FSA compliance.

We are also able to provide assistance on your RMAR submission to the FSA and assist with any other queries you may have on FSA regulation.

Our services are bespoke to your business. If you want more time to concentrate on your business and be given assurance that your FSA obligations are being met call David Evans on 01625 525580 for an informal discussion. Wilmslow.consulting@ntlworld.com

5. FSA Principles and Statement of Principles

Following recent Health check and Arrow preparation visits we have found that not all employees and senior management are aware of the FSA Principles and their impact on the way they do business. In most cases it was in the Compliance Manual and employees were expected to have read them. Often employees within the firm did not know that there was a Compliance Manual in place and those that did, did not know how to access it. In some cases a Compliance Manual did not exist and in other cases it was an off the shelf variety which in some cases did not mirror how the firm operated.

It is important to note that the Statements of Principles apply to all Approved Persons and Controlled Function holders. All individuals must be aware of and conduct themselves in accordance with the Financial Services Authority (FSA) Principles detailed below.

Introduction

The FSA have introduced eleven Principles, which apply to all members of your firm, and seven Statements of Principles, which apply to all Approved Persons and Controlled Function holders.

The eleven Principles are a general statement of the fundamental obligations of firms under the regulatory system and consequently are not exhaustive of the standards expected.

Conformity with the Principles does not absolve a failure to observe other requirements, while the observance of other requirements does not necessarily amount to conformity with the Principles.

The Principles derive their authority from the FSA's rule-making powers as set out in the Act and reflect the regulatory objectives.

The Principles do not give rise to actions for damages, but will be available for purposes of discipline and intervention. In essence, breaching a Principle makes a firm liable to disciplinary sanctions.

Where the Principles refer to customers, they should be taken to refer also to both retail and commercial customers and to potential retail and commercial customers, and where they refer to a firm's regulator, they mean a professional body that regulates the firm (in your case the FSA).

                                                   The Principles

The eleven Principles introduced by the FSA to meet the statutory objectives are detailed below and are applicable to all individuals within your firm:

Integrity A firm must conduct its business with integrity. Skill, Care and Diligence A firm must conduct its business with due skill, care and diligence. Management and Control A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems. Financial Prudence A firm must maintain adequate financial resources. Market Conduct A firm must observe proper standards of market conduct. Customers' Interests A firm must pay due regard to the interests of its customers and treat them fairly. Communications with Customers A firm must pay due regard to the information needs of its customers, and communicate information to them in a way which is clear, fair and not misleading. Conflicts of Interest A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another customer. Customers: Relationships of Trust A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement. Clients' Assets A firm must arrange adequate protection for clients' assets when it is responsible for them. Relations with Regulators A firm must deal with its regulators in an open and co-operative way, and must disclose to the Financial Services Authority (FSA) appropriately anything relating to the firm of which the FSA would reasonably expect notice.

6. Statements of Principles for Approved Persons and Controlled Functions

The Statements of Principle set out the standard of conduct, expected by the FSA for approved persons.

Statements of Principle 1, 2, 3 and 4 apply to all approved persons Statements 5, 6 and 7 apply to those approved to perform a controlled function, which is classed as a significant influence function.

A breach of a Statement of Principle will leave an approved person open to disciplinary action by the FSA. The FSA will, however, only take disciplinary action against an approved person where there is evidence of personal culpability on the part of that approved person. Personal culpability arises where the behaviour was deliberate or where the approved person's standard of behaviour was below that which would be reasonable in all the circumstances.

Statement of Principle 1
An approved person must act with integrity in carrying out his/her controlled function.

Statement of Principle 2
An approved person must act with due skill, care and diligence in carrying out his/her controlled function.

Statement of Principle 3
An approved person must observe proper standards of market conduct in carrying out his/her controlled function.

Statement of Principle 4
An approved person must deal with the FSA and with other regulators in an open and co-operative way and must disclose appropriately any information of which the FSA would reasonably expect notice.

Statement of Principle 5
An approved person performing a significant influence function must take reasonable steps to ensure that the business of the firm for which he is responsible in his/her controlled function is organised so that it can be controlled effectively.

Statement of Principle 6
An approved person performing a significant influence function must exercise due skill, care and diligence in managing the business of the firm for which he/she is responsible in his controlled function.

Statement of Principle 7
An approved person performing a significant influence function must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function complies with the relevant requirements and standards of the regulatory system.

7. RMAR Completion-Top Tips

1. Do not leave your submission to the last minute

2. Collate the information needed on the RMAR throughout the year and input the data as soon as the return is available

3. Retain your supporting documentation for each RMAR submission. This should make it easier to answer any questions about what has been included. This also provides a reference point for your next RMAR

4. Good internal accounting systems make it easier to complete the RMAR.

5. A well-run advisory company meeting FSA requirements should have systems in place to be able to demonstrate solvency on an on-going basis.

6. An alternative method for printing the complete return is to print each section using the browser button.

7. Some sections, such as complaints return, cannot be printed this way, but the FSA is working to improve this facility.

8. Senior management has ultimate responsibility for the information contained in RMAR submissions, irrespective of whether external assistance is used for completion.

9. Help text is available for each section of the RMAR. It offers help with the information required in most fields. If you have further questions, additional information is available.

Wilmslow Consulting Ltd will be happy to provide ongoing guidance on this issue. Call David Evans on 01625 525580 Wilmslow.consulting@ntlworld.com

8. TOP TIPS FOR SUCCESS

1. Excel at whatever you choose to do, and have a clear vision of what you aim to achieve.

2. Have a business plan and keep to it. If you do not have a plan and a subsequent goal to reach you will not get there.

3. Check your market and check your success rate. Learn how to find the ideal client. Be client-focused and offer regular updates and reviews and book your next appointment with them.

4. Join the relevant professional body(ies) and make use of their services. Accept the culture of regulation, innovation and professionalism.

5. Invest in the best systems you can afford and use them to your advantage. Never sit back, always go forward and search for more clients and investigate the market place.

9. Treating Customers Fairly (TCF) - Guidance

Firms are responsible for defining what TCF means for the business and establishing the relevant culture; and where a firm provides services to customers, the principle of TCF needs to be upheld throughout the advice process.

TCF involves the adherence to the FSA rules. However, compliance with the detailed requirements set out in the rules is not enough. Rules cannot cover every eventuality, and firms need to be acting to observe the spirit of what the rules aim to achieve.

Firms need to be able to consider and explain how the principles of TCF apply to their business.

What the FSA are asking firms to do can be summarised in four stages:

Stage 1

Step back and look at the operation as a whole.

Stage 2

Identify TCF risks.

Stage 3

Assess TCF risks.

Stage 4

Mitigate TCF risks.

As a starting point, stages 1 to 4, in simplistic terms, are what the FSA is looking for. In overview, firms should be able to describe their strategy and how TCF fits within it. They must ensure all staff understands the principles of TCF and that their behaviour takes into account their customers: