The deadline is set out in the regulator’s November 2010 “Dear Compliance Officer” letter.
The FSA letter reminds all compliance officers with responsibility for sales of non-investment protection products that their brokers must make appropriate oral disclosure when selling protection products to consumers. They must also provide product information in a way that is clear, fair and not misleading; provide information about the status and scope of the firm’s service; and ensure that any advice given is suitable.
The letter also requires all such firms to provide the FSA with written confirmation by 30 May that their sales policies and systems comply with all Insurance Conduct of Business Sourcebook (ICOBS) requirements. If unable to do this, then a written plan and timetable must be submitted.
Home Buyer Systems believes that some brokers are mistakenly assuming that this timetable only applies to sales of critical illness cover, rather than the full range of protection products, and that there is a risk that a substantial number of firms will fail to comply by the fast-approaching deadline.
Richard Angliss, managing director of Home Buyer Systems, said: “The issues covered in the November FSA Letter to Compliance Officers are wide ranging and have, so far, been under-exposed to brokers that sell protection products. Since the near collapse of the broker-distributed mortgage sector, the number of brokers selling protection products has risen sharply. This means that there are many firms who will potentially fail to comply with the written confirmation deadline, which is now just over four months away.
“Brokers need to be clear about the requirement to demonstrate compliance with all ICOBS rules by the end of May this year, and make sure that they have sufficiently rigorous and comprehensive systems and controls in place. This requires a total ‘root and branch’ evaluation. This then needs to be recorded and to a standard that will meet with FSA expectations. This is not necessarily something you want to hurriedly put together in an afternoon.”