Moore Stephens has warned that the Financial Services Authority's (FSA) proposed new rules on client money could cost brokers more time and money.
The FSA's consultation paper - CP12/20 - Review of the client money rules for insurance intermediaries - proposes changes to the client assets (CASS) rules to ensure that clients' monies are protected in the event of a firm's failure. And the accountant and insurance consultant firm has urged brokers to respond to this consultation.
Stuart Markley, a partner with the Moore Stephens insurance team, said: "It is fair to say that the FSA has never been entirely comfortable with the way insurance intermediaries hold client money under the CASS rules.
"It believes that insurance brokers have a poor understanding of the current rules. This is borne out by the results of FSA thematic compliance reviews which show evidence of poor compliance practices and widespread record-keeping errors involving missing or incomplete documentation.
"This puts at risk the objective of protection in the event of failure."
Comments
The FSA has invited firms to comment on its proposals by 30 November 2012. The proposals cover a number of topics, including client money calculations, bank reconciliation, the advancing of credit, and unallocated client money.
Mr Markley added: "The changes proposed by the FSA are sure to stir some debate and bring about some concern, not least because they could result in further time and expense being spent on client money obligations, with additional checks and controls being put in place."
He concluded: "If brokers and other intermediaries fail to respond to the FSA by the due date, they will lose an important opportunity to state their case."
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