Staying ahead of the regulator

Last year, we were looking forward to authorisation but, after many months of experience with the Financial Services Authority, have things changed?

It may have been easy to view authorisation as the objective, but this should have been a mere milestone. Focusing and preparing for the first visit by the FSA is a priority and, although some of you may not see the regulator for years, do not gamble on this.

First, know your regulator. The FSA Handbook has been streamlined for your benefit, while the FSA website contains newsletters and letters targeting your sector. Personal contact is also important. Knowing a supervisor at the FSA is a great help, though small firms may have to rely on its call centre.

Second, know the FSA's themes. The FSA often repeats a message, for example, 'senior management responsibility', 'treating customers fairly' and 'a risk-based approach'.

Treating customers fairly is a big issue and you need to document how you deal with this. Disclosure documents are an important part of treating customers fairly; the clarity, balance and proper disclosure in these documents is fundamental.

Also, systems and controls are relevant to small and large businesses alike.

Sometimes, the FSA singles out a specific product and, recently, it has named payment protection insurance. You need to be careful in this area.

Your regulatory returns will make you visible to the FSA. Although there is a small administrative charge for late firms, what impression do you think it will leave?

Claims and complaints handling is an area most of you will regard as an unwelcome consumer of time, hence, the FSA will focus on it.

A year ago, the FSA expanded its financial promotion team. Whether it is a published advertisement or not, be aware - big brother is watching. If there is anything that is debatable, change it.

Client money is complicated and has a detailed regime. Not holding client money is good news but, if this is not possible, you will have to learn your route.

The FSA wants a risk-based approach and wants the industry to focus on the key risks. It also wants senior management to take responsibility.

Finally, compliance can have a positive influence on your business and make a virtue of this necessity.

- Adapted from a speech presented at last month's Professional Broking Roadshows.