|  | | 2005 News and Press Releases | | |
HEADLINE NEWS:
Brokers May Be Forced To Disclose Commission Financial Services
Staff Writer -- Financial Times
Securities Mosaic. November 22, 2005
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EXCERPT: The Financial Services Authority has threatened insurance brokers with rules forcing them to disclose automatically to their customers what they are paid for securing insurance cover, unless brokers improve their handling of conflicts of interest. In a "Dear CEO" letter to insurance brokers, to be published this week, the City regulator said it would "assess whether there is a case to amend our policy for commercial customers to introduce the compulsory disclosure of commission and, if so, whether to make this binding on both intermediaries and insurance companies". It added: "We do not believe that there is currently a quantifiable market failure in this area which requires regulatory intervention. However, our view is clearly linked to how much we are able to rely on the rigour of conflicts management processes within intermediary firms." Steve White, head of compliance and training at the British Insurance Brokers' Association, described the threat as a "shot across the bow of intermediaries", outlining the action that could be taken if brokers failed to manage conflicts of interest effectively. He added: "The message to firms is loud and clear: you must manage (conflicts) and you must be able to evidence that you are doing so." Mandatory disclosure would be an about-turn for the FSA, which took over the regulation of insurers and brokers at the beginning of this year, and which has previously stopped short of forcing insurance brokers to disclose automatically what they are paid, in spite of calls to do so from insurance buyers and from Lloyd's. In April, John Tiner, chief executive of the FSA, said "it would not make sense to bend like a reed in the wind" and bow to calls for mandatory disclosure. A decision on mandatory disclosure would be made at the same time as a review of the conduct of business rules for insurance brokers, due to begin in April. |
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