UK's Financial Services Authority Finalises Reporting Requirements To Help It Monitor Retail Financial Markets

The Financial Services Authority (FSA) today finalised its reporting requirements for firms involved in mortgage, general insurance or retail investment activities. The regulator will use the information it collects about firms' financial health and business activities to monitor compliance and to identify trends and anomalies. This, in turn, will help it to determine what thematic (sector-wide) or firm-specific work needs to be done to protect consumers and maintain market confidence.

The FSA is currently reforming its firm reporting requirements. In particular, it believes that improved reporting requirements are essential for the cost effective monitoring of the many thousands of smaller firms in retail financial markets, including those that will fall within its scope when it starts regulating mortgages and general insurance. If the FSA did not collect this information, it would not be able to target its resources as effectively - bringing additional costs for firms and ultimately for consumers.

Sarah Wilson, FSA Director of High Street Firms said: "We need to have a clear picture of what is happening in the market place to help us to spot potential problems early on and determine whether action needs to be taken. That is why we are asking firms to provide us with information on a regular basis. This will help us to be cost effective - by allowing us to be present on the ground where it matters most.

"All firms affected by these new requirements, including those new to regulation in the mortgage and general insurance sectors, have twelve months to implement them.

"For mortgage and general insurance firms this is the last part of the future regulatory regime to be finalised. For smaller firms from these sectors, we are conscious that getting to grips with our requirements is a big task. So today we have also published a guide to help such firms access the FSA Handbook and find the rules that are relevant to their firm. It is not a substitute for actually reading the rules themselves, but it should make it much easier for small firms to find their way around them."

These proposals were initially put forward in CP197: Reporting requirements for mortgage, insurance and investment firms, and audit requirements for insurance intermediaries.

Following consultation, the FSA is introducing some amendments to help firms meet its reporting requirements. They include:

• Deferring introduction of financial information reporting requirement
  The FSA has listened to concerns about the costs to smaller firms of supplying financial information on a six-monthly basis. Small firms will, as a result, be excluded from the requirement to report mid-year financial information, for the first year. Thereafter they will have to report on a six-monthly basis.

  The FSA will also be considering how else it can help smaller firms reach a position where they can complete their returns without professional guidance.

• Rationalising scope of Product Sales Data (PSD) reporting
  Following feedback on the types of products that should be included in the scope of PSD reporting, many general insurance products will now be excluded from these requirements. The FSA will keep this position under review.
• More time to capture information about advised/non-advised sales
  The FSA disagreed with product providers who argued that they should not have to record whether a sale was advised or not. However, to give firms time to adjust their systems and to reduce the upfront costs, a transitional period of one year will be put in place during which time firms will not be required to provide this information

Background

1. Small firms are defined as those whose annual income from retail mediation activities in the previous financial year was £60,000 or less.
2. The Policy Statement 04/9: Reporting requirements for mortgage, insurance and investment firms, and audit requirements for insurance intermediaries is here.It should be read in conjunction with the Policy Statement 04/8: Regulatory reporting - an integrated approach also published today which provides further information on reporting requirements.
3. The Guide to the FSA Handbook for Small Mortgage and Insurance Intermediaries is published today and available available here.
4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection of consumers; and fighting financial crime.
5. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.