Explaining endorsement

Ian Ritchie, Managing director, RW Associates

If your client is in a non-hazardous business and has a 'standard' policy with no unusual or restrictive endorsements, then, provided that everything is set out clearly, there should not be a problem. However, if there are restrictive endorsements or warranties, then these should be clearly explained to the client, together with the consequences of non-compliance.

You should not assume that a commercial insured would have sufficient knowledge to understand and interpret not so much a warranty - remove all trade waste, say - but the consequence of non compliance, should that result in an insurance claim.

What has all this got to do with regulation? I carry professional indemnity insurance, so if it does go wrong, both I and my client are protected.

Well, there are a number of regulatory issues to consider. In sharpest focus would be ICOB rules, and if the regulator took an interest, you would need to demonstrate that you had given suitable advice to your client.

If your staff are not recognising the danger, then clearly there is a training issue. It may also be that, as an approved person, your responsibility for the competence of your firm's operations is called into question.

In the run-up to regulation, we talked about embedding compliant practices into the day-to-day operations of firms.

Taking on board the dangers flagged above, and ensuring that the potential pitfalls indicated are avoided, would be a giant step in that direction for any brokerage.