The Financial Conduct Authority (FCA), which has identified common shortcomings in relation to general insurance intermediaries’ client money arrangements, is reminding companies of their obligations and the consequences of non-compliance.
“Firms holding client money are responsible for ensuring they understand the associated regulatory requirements,” wrote the regulator in a new ‘Dear CEO’ letter to general insurance intermediaries.
“Principle 10 of the FCA’s Principles for Business states a firm must arrange adequate protection for clients’ assets when it is responsible for them. Further, Principle 3 requires firms to take reasonable care to organise and control its affairs responsibly and effectively.”
In the correspondence, the watchdog said organisations should continually review their client money arrangements and rules compliance. It was stressed that firms are expected to take robust action if needed, to ensure that client money is appropriately safeguarded. Accordingly, senior management are expected to have appropriate oversight.
The regulator warned: “We take failure to comply with the Principles for Business and the client money rules seriously.
“Where it appears that firms may be contravening or not meeting our standards, we may use our powers under Part 4A of FSMA (Financial Services and Markets Act 2000) to vary a firm’s permission, impose requirements, or change individuals’ approvals on our own initiative.”
In its letter, the FCA outlined the key issues and its corresponding expectations in the areas of client money calculation; appropriate withdrawal of commission; client money bank accounts and acknowledgement letters; segregation of client money; co-mingling risk transfer money with client money; and client money audit.
“We will continue to assess firms’ client money arrangements in line with our supervisory strategies for general insurance intermediaries,” said the watchdog. “Where we find that firms are not meeting their obligations under our rules, we will take appropriate action…”