Are you prepared for a visit from the regulator?

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This week, FCA visits were back in the spotlight as it emerged that the regulator has paid visits to 11 SIPP firms.

A Freedom of Information request from Professional Adviser magazine found that the Financial Conduct Authority visited the 11 firms following its ‘Dear CEO' letter to the SIPP market in October last year.

Planning for a visit from the regulator is a topic we’ve covered previously, and this seems like a good time to look again at how you can be prepared if the Authority announces that it intends to pay your firm a visit.

Why does the regulator visit firms?

The FCA visits numerous firms each year to identify how their processes, procedures and outputs measure up. Some of these visits come about as part of the regulator’s programme of thematic reviews into specific sectors.

Others are the result of specific intelligence about a firm and its operations or financial promotions, which might come from within the industry or from complaints by the public.

In some cases, as with the SIPP firms, it might be part of a wider piece of work by the FCA.

Whatever the reason for the visit, a regulatory visit can be a daunting prospect.

Being prepared is the key to being on the front foot. The good news is that there are steps you can take to plan – and possibly even to help you avoid a visit altogether.

5 steps to help you prepare for a possible regulatory visit

  1. Understand the FCA’s priorities

The regulator’s annual Business Plan gives clues as to the Authority’s priorities and any sectors it plans to put under the spotlight. Read our analysis of the 2019-20 plan.

     2. Have a robust risk management strategy

Your risk management strategy should be designed to pre-empt any FCA visit. It should be designed to mitigate business downtime – and cover all the areas that the regulator sees as important. Ensure your approach to regulatory compliance – whether around operations, sales, customer service or financial promotions – is designed to minimise risk of breaches.

    3. Identify the areas the FCA might challenge you on

Consider areas of possible challenge. Are there things you know you don’t do so well? It’s a good idea to undertake ‘mock’ interviews to prepare for this. Role playing a visit can make a big difference in terms of your success. Work with your CF10 to understand areas of potential weakness and how you can show ways you’re trying to improve.

The regulator will be interested in your business plan; make sure you know it inside out. You’ll need to be able to explain any objectives and your timescales to achieve them.

    4.  Make sure all your documentation is up to date

Strengthen your compliance performance by updating documentation. The FCA will expect to see a robust audit trail outlining your processes, decisions and promotions approvals.

    5.  Ensure your financial promotions and the processes you use to produce them are up to scratch

Clear, fair client communications are central to the regulator’s Treating Customers Fairly ethos. With complaints to the Financial Ombudsman on the increase, many consumers’ expectations are clearly not being met. Can you evidence the correct Compliance review and approval procedure has been followed? Do your promotions meet the FCA’s ‘fair, clear and not misleading’ requirements?

Free guide on preparing for an FCA visit

Whether or not the FCA has announced plans to visit your firm or review your sector, these tips will help you work in a way that meets regulatory compliance requirements.

If you want to be prepared for any potential regulatory visit, you can download our guide, How to prepare for an FCA visit, written by compliance expert Christopher Hall.

It has a wealth of tips as well as 13 questions you should ask yourselves before the regulator arrives. The guide is free, and you can download a copy here.

Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.

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