This is a stark warning for firms who will now hold greater accountability for their ARs.
This news comes as the FSA reveals that many firms are not doing enough to ensure their ARs are implementing TCF when selling general insurance, mortgage and investment products.
Alongside the four firms being considered for referral to enforcement, follow-up visits are scheduled for 11 firms early next year after they were identified as needing significant remedial action to see that they have addressed failings identified.
The review, conducted over the last few months and mainly involving smaller firms, follows a similar project carried out in 2006. Many of the concerns identified then have not been adequately addressed.
Across the four areas reviewed - Systems and controls, Recruitment, Training and Competence and Treating Customers Fairly - the poorest standards overall were found within general insurance firms, with a better picture in the mortgage sector and with the highest standards seen in investment firms.
Key concerns include:
- Firms' written procedures not being followed in practice
- Too much reliance placed on the remote checking of client files as the sole method of monitoring ARs
- Poor progress with Treating Customers Fairly with ineffective communication to ARs
- Not having appropriate management information or measures in place to test whether ARs are delivering the Treating Customers Fairly consumer outcomes and working towards the end of December 2008 deadline.
They also need to ensure that their ARs understand that they should treat customers fairly before, during and after the point of sale.
Stephen Bland, director small firms division at the FSA expressed disappointment that ARs were still not conforming to the principles-based regualtion, sayiing that firms needed to act now.
"We have set a deadline of end December 2008 by which time we expect all firms to be able to demonstrate that they are achieving the six TCF outcomes," he said. "Principal firms therefore need to ensure that they have appropriate controls in place and management information that enables them to be confident ahead of the deadline that their ARs are treating their customers fairly."
