Please allow me to introduce myself...
When I was just a slip of a lass, my Grandma always used to tell me “Beware of the man whose eyebrows meet, for in his heart lies deep deceit”, whereas my Grandad was more fond of the homily “Never trust a man who doesn’t like football”. As you can imagine, this left me reasonably well prepared for vetting potential suitors, but with a very problematic relationship with Mancunian guitar bands of the 90s.
Luckily, in our line of work, you don’t have to try and work out the trustworthiness of an individual based on old wives’ tales; we have rigorous FCA guidance in place to help us evaluate who is a suitable person to work with and who is not.
The regulator has again raised concerns relating to how consumers are being referred to authorised firms. We have seen the regulator express concerns in the past particularly around investment and pension business, but this is now also relevant to consumer credit firms where they accept business from introducers.
It is essential that you continue to protect the interests of your firm, and to do this, you should ensure an agreement is in place with your introducer(s). This should be one that clearly establishes the relationship and the responsibilities of each party. This agreement will identify a referral and should consist of the name(s) of the referred and the nature of the referral.
Undertaking due diligence on the introducer plays an important part of this process and, in addition to a general assessment, you should carry this out on each referral by ensuring the following is observed:
- The introducer should not be suggesting or directing the firm to a particular source of credit
- The authorised firm should not request that the introducer gathers full client information, delivers any recommendations or carry out any actives within the regulated process
The regulator has highlighted potential risks when dealing with introducers and covers how authorised firms should be identifying the dangers and carrying out due-diligence. These include;
- questions that firms should consider when accepting introductions from introducers that may give rise to concerns;
- the regulatory requirements placed on authorised firms in this context;
- the actions that firms should take to ensure they minimise these risks to both customers and themselves
The importance of the above is regularly identified and is the subject of challenge with firms during the course of FCA visits. This is, and will continue to be, a significant area of risk for the regulator and during the course of a visit, a number of focussed questions are likely to be directed at firms. From our experience these include:
- What due diligence have you completed on your introducer?
- What evidence do you have of this due diligence?
- Have you met any of the introducer’s staff?
- What guidelines have you given to your introducer and how can you evidence this?
- Have you refused any introductions or referrals? Do you have any records for these?
If you have introducers, you should ensure you can comfortably respond to the above questions.
It can be difficult to keep up with constantly evolving regulatory change such as this, particularly when you have the small matter of running a business to consider at the same time! Fortunately, working with an organisation like The SimplyBiz Group means that our specialist team will keep you up-to-date with what you need to do, the practicalities of how to approach it and the regularity with which it needs to happen, so that you don’t have to do it all yourself. If you want help with adapting to FCA regulation and keeping compliant on an ongoing basis, please get in touch with us urgently on 01484 443424.