The FSA has warned financial intermediaries that they must not allow financial pressures to lead to a reduction in resources devoted to compliance activities. On the contrary, the FSA (in its Financial Risk Outlook published on 9 February) say that retail intermediaries should increase resource in this area.
The FSA say they continue to be concerned about inadequate levels of oversight and control often seen in retail intermediary firms. They particularly warn networks that they are relying too heavily on remote monitoring; networks may need to increase the level of resource they dedicate to oversight and compliance.
The FSA warn that financial pressures may lead advisers whose remuneration depends on sales volumes to make inappropriate sales, and firms must have in place controls to prevent this. Quoting the Madoff case, the FSA warn that current financial circumstances may lead to increased fraud.
Given the FSA’s recent focus on personal accountability of senior management, directors of intermediaries who fail to heed the FSA’s warnings about the need for adequately resourced compliance departments will run the risk of personally facing enforcement proceedings.
The FSA also took the opportunity of the Financial Risk Outlook to confirm that the current financial crisis has not led to any change of direction in its proposals for the Retail Distribution Review.