The FCA has published an alert on its website highlighting the potential risks that arise from authorised firms accepting business from unauthorised introducers, lead generators and other authorised firms (the introducer).
The FCA is concerned that it has seen an increase in cases in which the introducer has inappropriate influence on how the authorised firm carries out its business, in particular where the introducer influences the final investment choice.
The FCA reminds authorised firms that accept business from an introducer that they must meet its regulatory requirements. If customers are given unsuitable advice by an introducer, the authorised firm may be held responsible for this and be subject to regulatory action.
The FCA states that authorised firms should:
- carry out robust due diligence on the introducers they transact with;
- have in place a robust vetting procedure to ensure the introductions have been sourced legitimately;
- regularly review and ensure that their systems and controls are adequate so that they may demonstrate full and complete ownership of the advice they are providing;
- only recommend products that they fully understand – how it works, the risks involved and undertake adequate due diligence;
- provide independent advice to customers introduced;
- not allow another entity – regulated or not – to use its firm reference number unless it is satisfied its being done appropriately; and
- only delegate the performance of regulated activities to other authorised firms that have the required permissions or who are the firm’s appointed representatives, with appropriate monitoring.
View FCA highlights risks of accepting business from introducers, 2 August 2016