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Compliance Portal
January 10, 2022
Jill Hambley, MD of ICS, talks about why the ICS team try not to say 'no'.
You may have come across other parents who offer their children a ‘never say no’ day. I have to be honest and say, from a parenting perspective, the thought of a day when my children can do absolutely anything they like and I’ll be asked to take part, fills me with abject horror. I know what I routinely say no to at home (climbing onto the shed and jumping off, skateboarding down the hill near our house etc) and have no desire to visit our local A&E any time soon.
However at work it’s a completely different story and the ethos of every day is centred on not saying no. Our focus at ICS is to provide regulatory compliance support to general insurance intermediaries and there is a lot of support to be provided in the current climate! In providing that support we are regularly asked to consider the regulatory implications for our clients developing into a new market, expanding their distribution model, changing their legal or ownership structure etc. The pandemic has also brought about increased activity from firms as they look to diversify and/or expand.
The FCA handbook is a challenging read, some sections of it more than others. Perimeter Guidance is a particular struggle for firms as they look to establish the regulatory implications for new sources of business. Depending on the nature of the introductions and those entities making them they could be classed as unregulated, regulated, exempt, Introducer Appointed Representatives or Appointed Representatives. This is an area where it would be quick and easy to tell firms that the rules prevent them from developing new sources of business. But we genuinely love the problem solving element of our roles and below is an extract of a recent communication with a client that sought to resolve an issue in this area where they wanted to understand how to classify an introducer :
The following points are to consider in the decision process:
- By making the introduction i.e. passing leads is the introducer conducting regulated activity – yes
- Is the introducer regulated either directly with appropriate permissions or as an exempt firm AR/exempt professional firm – yes, set up appropriate regulated introducer agreement – ICS has template
- No – can the introducer rely on an exclusion – Yes – issue non-regulated agreement – ICS has template
- No – the option of last resort is whether the introduction passes the ‘by way of business test’ which it needs to, to be regulated. There are 2 elements but both need to be passed for the test to be met. Element 1 – is how regular is the occurrence however it is safer to always treat this element as having been passed; Element 2 – is remuneration received in relation to the introduction – this can be both direct or indirect i.e. even if introducer doesn’t receive commission does the introduction cause indirect remuneration e.g. increasing their clients who pay for other services etc. More often the test is passed.
In terms of moving forward, you will need to consider how introductions are made and whether 1,2 or 3 applies. Once this is determined you will then need to undertake due diligence to ensure you are satisfied to deal with them. If you wish to appoint as an IAR, there is a process to follow with the FCA on Connect and you will maintain regulatory responsibility.
In this instance the Consultant was able to further help the firm come to the right conclusion, ensure they had the correct agreement set up with the new source of business and a process to monitor activity going forward.
We have a hugely experienced team of consultants at ICS, which you can see from our Team page so if you need to benefit from their talent for problem solving then do please get in touch.
