The Financial Conduct Authority (FCA) classifies each of the firms it regulates into one of four categories – C1 to C4 – depending on the level of risk each firm may present. If you are a small firm, it is likely that you will be placed in the C4 category. But, even though C4 firms may only be assessed once every four years, and even then the assessment might be conducted via telephone or online rather than via a firm visit, all regulated firms must be ready to be inspected by the FCA at any stage.
In addition to the regular programme of firm assessments, the FCA may decide to visit your firm as part of a thematic review. Here, information is collected on a selection of firms to assess their conduct standards surrounding one specific issue. Alternatively, they may visit after seeing information in a regulatory return, which leads them to think that your firm poses an increased risk.
Therefore, all firms must consider this question: If the FCA walked in to your premises today, would they like what they see?
No matter how it uncovers the issue, if the FCA finds fault with your firm, it can refer the matter to the Enforcement Division for a formal investigation, and disciplinary action may follow. You are advised to have a regular internal audit of your compliance arrangements and engage a third party consultant to conduct their own compliance review. By doing this, any issues can be identified and corrected before your next FCA assessment.
A compliance audit should cover issues such as:
- The quality and number of file reviews being undertaken, and whether there is an appropriate system for selecting which files are reviewed
- Whether your customers are being treated fairly
- The quality of the information provided to your clients
- Your training and competence arrangements
- Your documented compliance procedures
- The content of your website and marketing material
We at Scott Robert have many years’ experience of carrying out audits of firms’ compliance arrangements. Contact us today to see how we can help.