Financial Services Authority

Print this Page	2.8 Compliance 12. Financial Services Authority	Close this Page

2.8.12 Financial Services Authority:

Applications have been designed to help its users conform with all aspects of FSA regulation.

1. Management responsibilities for strategy and reporting are based on treating customers fairly - record keeping has been designed to demonstrate these obligations.

2. Sales and Marketing is assisted by providing relevant and meaningfull data entry forms where accuracy can be maximized.

3. After Sales Customer Care is managed with effective methods to deal with issues and claims, without being directly involved in customer interactions.

Treating the customer fairly:

1. Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture.

2. Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.

3. Consumers are provided with clear information and are kept appropriatly informed before, during and after the point of sale.

4. Where consumers receive advice, the advice is suitable and takes account of their circumstances.

5. Consumers are provided with products that perform as firms have led them to expect and the associated service is of an acceptable standard and as they have been led to expect.

6. Customers do not face unreasonable post-sales barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

Customer Centric:

Applications have been designed to comply with FSA obligations by being customer centric, rather than older systems that were risk centric.

Capital Resource Requirement:

2.5% of the annual income or £5,000 (whatever is higher) where client money is NOT held.

5% of the annual income or £10,000 (whatever is higher) where client money is held.

Financial Services and Markets Act 2000:

Data must be accurate; timely; relevant and consistent.

FSA Authorisation:

Application users who are selling, arranging or advising on insurance products or helping policyholders claim on insurance need to be FSA authorised people.

Appointed representatives may be excempt and will not need to be authorised.

To become FSA authorised, a straight forward application may cost £1500, a moderate application £5000 and a complex application £25,000 with an expectation that most financial advisors and insurance intermediaries will be a straight forward application. Authorisation process takes 3 to 4 months.

Appointed Representative (AR):

An AR is a person who conducts regulated activities and acts as aan agent for a firm directly authorised by the FSA as the AR's principal.

A written contract between the principal and AR must exist to document the arrangement and the principal takes full responsibility for ensuring that the AR complies with FSA regulations.

Introducer Appointed Representative (IAR):

Where your business is to introduce customers in relation to insurance to a firm and/or distribute insurance marketing material, you may become an IAR.

A written contract between the principal and AR must exist to document the arrangement and the principal takes full responsibility for ensuring that the AR complies with FSA regulations.

FSA Role:

To review how the Principal is complying with the applicable regulatory requirements with an emphasis on its oversight of its ARs.

Principal Role:

To ensure that its own business and its AR businesses comply with the relevant regulatory requirements.

To indemnify any liabilities that arise from these businesses.

To keep the FSA notified of who their AR's are.

To report to the FSA where appropriate, on their activies and those of their AR's.

At all times, the Principal must have adequate controls and resources to ensure that its AR's are fully compliant - the Principal is responsible for ensuring that its AR's at the time of appointment and on an ongoing basis are:.

1. Fit and proper to deal with clients.

2. Able to deliver the same level of protection to clients as if clients had dealt with the Principal itself and if the AR is not, the Principal must provide that protection itself..

3. To be solvent, suitable and without close links which would be likely to prevent the effective supervision of the AR by the Principal.

AR Role:

To understand and comply with the regulatory requirements relevant to the business they carry on for the Principal.

To provide the Principal with access to staff, premises and record to enable the Principal to carry out its supervirsory responsibilities.

To ensure the AR has the relevant approved persons where this is required.

Method of Working:

All premiums must go to the Principal and cannot be offset against refunds or claims.

The premium account, refund account and claims account are never balanced against one another.

Financial Services:

Financial transactions are automatically created by application services in such a way that nobody could invent a way to fraudulently create invalid transactions or delete valid transactions. All parties must be very aware that no data can be deleted and financial data cannot be changed in any way.

The act of approving a policy is to create a set of interlocking financial transaction that are frozen and assigned to the client account, broker account, BM account, CH account, Owner account and ASP account. All financial transactions for all accounts are automatically replicated to many secure databases in remote locations. It is not possible to imagine how a criminal could make a change to any financial transaction without it being very clear in statements, bordereau and cash flow reports that consolidate all such financial data.

By Design:

If any one field in any transaction is changed, the whole account will not balance. All data is replicated in many databases in different locations, so a change in one location will be detected by a difference to another location.

All financial management information reads fixed financial transactions that are continually checked for a balance. Where a broker account is scheduled to have 15% of the revenue, then if the amount in the broker account was more or less than the 15% it would be easy to identify and reported in real-time. The only change to financial transactions is that the complete set may be marked as expired or cancelled with the state of the policy is changed to expired or cancelled.

Financial Transactions:

A set of financial transactions are created when a policy is approved and the sum of those transactions must always be 100% of the client payment. All revenue comes from the client and so it is easy to balance what comes in with what goes to each party in the value chain. At all points in time, 100% of the revenue must match 100% of what is paid to each party - the financial application cannot have some money left over or a deficiency of money to assign to all parties.

A very clear time scale of payments flow to the value chain and that information is always available in real-time for all to see. The application service does not have "batch" reports that are created at a point in time, the application service only has real-time reports that are available 24*7 for any range of dates or month. By making all management information real-time, the frauds that can be hidden inside the time delays of a "batch" report are eliminated.

Insurance Policy State:

Once a policy has become approved cover state, then it is on a timer for payment to be made in a certain number of days. Where payment is not made by the appropriate date, the policy is automatically cancelled and all associated financial transactions are automatically cancelled.

The internal architecture of the financial accounting services means that no change can ever take place and if one transaction was ever changed, it would quickly be detected as it would not balance with all the other associated transactions for the policy. Trust is built on the backs of people understanding the compliance architecture and taking time to explore all services to ensure that other parties could not be defrauding the application service in any way.

Once a policy has achieved a certain state where it is approved, then all changes must be frozen, but if a change was made, that change would not have any way to change the financial accounting service. By replicating certain data, an interlocking mechanism of compliant security is created that is beyond what a criminal could attack and fraudulently change.

Financial Services: