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FSA urging networks to shake up AR supervision

Regulator probes 15 networks and finds shortcomings in many of their monitoring procedures

The FSA is calling on retail networks to improve their supervision of appointed representatives after its latest survey found shortcomings in many firms’ procedures.

The regulator expressed concern over areas including the level of compliance resour-ces in principal firms, the quality of desk checks and field visits to check ARs’ compliance, the use of computer systems for monitoring ARs and how far networks operated a risk-based approach to monitor-ing ARs.

The FSA’s survey involved visits to 15 networks which carry out a mixture of investment business and mortgage and insurance mediation. The firms varied in size from 10 ARs to 850 ARs.

The FSA has published a factsheet suggesting how networks can improve their compliance and approach to sup- ervising ARs, admission to membership and documen-ted procedures.

It says senior management should establish and main- tain effective systems and controls to comply with FSA requirements for monitoring ARs. Before registering an AR, principals should be able to demonstrate how they have assessed their finan- cial situation, knowledge and ability to carry out regulated business.

Head of department (retail firms division) Alison Hewitt says: “We expect networks to apply appropriate controls on their ARs so that these firms maintain the same standards as directly authorised firms in their dealings with customers. However, we will be carrying out further work next year to monitor the position and we will take appropriate action where concerns remain.”

Sesame chief executive Patrick Gale says: “Although Sesame was not involved in the research, I am not surprised by the results. It is tough to meet the regulatory requirements and smaller and new firms are struggling.

“It would be helpful for the FSA to tell us how ARs are performing against directly authorised firms to put this into context.”

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