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FCA warns networks must take responsibility for member firms

Financial advice-planning-advice-cashflow-analysisThe FCA has warned networks must take responsibility for the advice their appointed representatives give.

The regulator has outlined a number of risks today that it says principals must make sure are considered among the member firms they oversee.

The FCA warns that the investment choices and advice given by an AR can be “inappropriately influenced” by external firms introducing business to them.

Where monitoring and due diligence is lacking, the FCA warns that there is a “risk customers may suffer financial harm” because the underlying investments are controlled or closely linked to the introducer.

It says: “Some of the investments may be badly run while others may be outright scams.”

The regulator says that it has “seen instances where the referral from the introducer is made with a clear investment desire expressed by the customer and documentation already completed.”

“As a principal you are responsible for the regulated activities of your ARs,” the regulator notes.

What does the FCA expect on introducers and third parties?

Networks have been appointing some ARs just to generate investment introductions, the FCA says, but need to make sure they are authorised to conduct the work.

It sounds a further warning about when ARs use their firm reference numbers to conduct business outside what had been arranged with the network.

The FCA’s note concludes: “We have found some principals are not always monitoring the type, volume and source of business being submitted by its ARs. A principal needs to have a well-structured monitoring process in place to identify business trends which could result in risk to customers including poor investment outcomes. In addition, if an AR has not submitted any business or generated introductions for some time a principal should consider why they should remain registered.”

The FCA sounded a similar warning on how introducer firms can impact the advice process last year.

Money Marketing has reported on a number of cases where pensions lead generators have been reported to the regulator.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. I’m truly gobsmacked! Do you mean to say that the networks didn’t take responsibility for their members before? Unbelievable!

  2. The regulatory tree needs a good shaking…

  3. It seems strange the same princples do not appear to apply to Directors or Chief Executives who apear to be ” above all that” (IE Regualtory and monitoring lark) It seems it is the Three Muskateer pillars one for all and none for some approach. The great British Rip Off endowments pensions and now “Auto” ( compulsory )enrolment into dodgy pension comapnies who pay theri Fines to the Government. Carry on up the Regulator. Strictly not dancing, or co operating merely bending their Rules – because they can.

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