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FSA continues its focus on adviser clawback debts

The FSA has warned it will continue to monitor firms with provider clawback debts after finishing its thematic work which resulted in 11 firms being asked to take remedial action.

The FSA announced at Money Marketing Live last Autumn that it was collecting information from providers on adviser firms with large clawback debts. The work has now completed with 11 firms asked to improve their systems and controls and selling practices.

But the FSA has warned it will continue to monitor firms with clawback debts, in particular firms who have debts with more than one provider, have large debts in relation to their size and evidence of legal action being taken against them by product providers.

As part of the project the FSA researched the position of around 150 advisers due either to providers reporting clawback debts owed or because the firms had previously shown financial weakness.

It then visited 15 firms it had the most concern about to assess selling practices in detail- 12 of which had clawback debts and three with a history of financial weakness.

It says it found firms with clawback debts tended to have poor systems and controls and selling practices – for example client’s attitude to risk was adequately established in only 33 per cent of files reviewed.

The FSA’s July newsletter says: “This project is a good example of the increasing use we are making of the data we receive. In particular, data we regularly receive from product providers on commission clawback debts owed to them by financial advisers. We will continue to monitor firms with clawback debts.”

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