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Financial services intermediaries quality assurance and tcf questionnaire[fsa]

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  • 1. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireCONTENT Introduction Section 1 Frequently Asked Questions Section 2 Instructions for Completion Section 3 Your Details Section 4 Standard Form Questionnaire Section 5 Comprehensive Form Questionnaire (optional) Section 61 INTRODUCTIONThis questionnaire can be used by the following groups of financial service intermediaries as its content will adapt to suit the profile entered in the YourDetails section: l Financial Advisers l General Insurance Intermediaries l Home Purchase & Reversion IntermediariesBackgroundEffective risk management is an essential feature of all successful professional organisations and is one of QBE’s key considerations when reviewingpolicies. Our statistical analysis tells us that, on average, firms that do not engage in our risk assessment process, experience claims values 35% higherthan those firms that do participate. The primary purpose of our questionnaire is, therefore, to raise awareness of risk management issues and toencourage the adoption of quality assurance principles to manage risk. It is not solely about results achieved, and we do not expect all firms to score100%. Rather, we aim to work with our insured clients to improve their management processes so that the likelihood and value of claims is reduced. Werecognise that this process takes time, but this is wholly consistent with our approach of continuity, stability, and our long-term commitment to theprofessional indemnity market.BenefitsYour response to this questionnaire will be analysed to prepare a report on your business with reference to our ’Professional Management Standard:Insurance, Mortgage & Investment Intermediaries’. The report, which is free of charge, will be delivered to you in hard copy, and will include prioritisedaction points for your consideration (a colour-coded system indicating your action priorities as high, medium, low or other), plus a TCF summary showingthe FSA’s six TCF Indicators mapped against each of the requirements. You will be able to use this to identify TCF gaps and subsequently chartimprovement progress as you implement the corresponding recommendations.QBE is the only insurer that has sought to harmonise its Quality Assurance (QA) and Risk Management procedures with an industry specific qualityassurance standard. Developed from the QBE ‘Professions Series’ quality assurance framework, which itself is based on the ISO 9001 model, thequestionnaire is designed to provide you with a tool to review your management structure and processes – an exercise that will assist both insurers andinsureds to assess risks and act accordingly.QBE is committed to the continued development of both service and market understanding to assist clients through today’s challenges in business. Thisinitiative underlines our long-term commitment to the professional indemnity market for financial services intermediaries and to helping our insuredsachieve high standards in their quality assurance and risk management processes.About QBEQBE Insurance Group is one of the worlds leading international insurers and reinsurers, headquartered in Sydney, Australia. We operate out of 45countries across the globe, with a presence in all key insurance markets and are lead underwriters within our chosen markets, setting rates andconditions. For the year ended 31 December 2007, the company underwrote gross written premium totalling AU$12,406 million and held shareholders’funds of AU$8,479 million.Since 1981, QBE Insurance Group has successfully completed 100 acquisitions; including the high profile acquisitions of Limit Underwriting plc in 2000and Praetorian Financial Group and Wintherthur US in 2007.The Group consists of three geographically focused operational divisions: European Operations, based in London, the Americas, managed from NewYork, and the Australian Pacific Asia operation - managed from Sydney.QBE in EuropeQBE’s European Operations, which accounts for 42% of QBE Group turnover, is a leading specialist in London market and European commercial linesbusiness. QBE offers considerable diversity to the broking community; active in both the Lloyd’s and company market. QBE operates eight product-focused underwriting divisions: - casualty, QBE Re Europe, property, motor, marine & energy, specialty, aviation, all of which have the ability to write onboth Lloyd’s and company market paper; and British Marine, the P&I specialist. In addition to the London market, QBE operates from seven UK-regionalcentres and has a presence in 15 European countries.
  • 2. Appetite for RiskQBE is known throughout the market for its healthy appetite for risk and willingness to work flexibly in partnership with brokers. From policy inception toclaims settlement, the QBE approach is to use our market expertise to understand the needs of the individual client. Then we tailor our solutions to fitthose needs. We dont believe that one size fits all or that we should follow what other insurers do, which means we are always willing to take a view onspecialist risks.RatingsStandard & Poors insurer financial strength and counterparty credit rating for QBEs main insurance subsidiaries is A+ (Stable). Fitch Ratings insurerfinancial strength rating for QBEs main underwriting subsidiaries is A+, and the agency has also affirmed a long-term credit rating at A. Their outlook forall ratings is Positive. A. M. Best assigned the financial strength rating of the QBE Group of companies A (Excellent).All figures are correct as at 31 December 2007.For more information on QBE Casualty, please visit our website www.QBEeurope.com/casualty.2 FREQUENTLY ASKED QUESTIONSWhat is the standard and why does QBE use it as a performance benchmark?The Professional Management Standard: Insurance, Mortgage & Investment Intermediaries is one of the QBE Professions Series. Written specificallyfor brokers, it is growing in acceptance as an effective standard for the industry. The standard is used as the platform on which to develop thisquestionnaire as a risk management tool because it addresses all the main causes of claims against brokers. In addition, the standard covers specificprocedures for assessing and managing risk within your organisation.Is the standard relevant to smaller firms?The standard was originally completed and introduced in 2005. A key part of the development programme was to ensure that the standard is of equalvalue to organisations of all sizes. Whilst the same goals must be achieved by all firms, a smaller business will have less-complicated structures andfewer people involved in its risk management processes and so its systems and controls can likewise be simpler.A good deal of the QA process, especially in relation to high PI risk factors, is concentrated on organisation’s contractual activities and client care.These are the day-to-day operational aspects of business management that are of vital importance in terms of mitigating losses and therefore, therequirements are homogenous regardless of the size of your organisation.The standard and questionnaire have had two major upgrades - one in 2006 and another early in 2008 to take account of MiFID, the TCF theme, and thechangeover to principles-based regulation and the corresponding changes to the FSA rules. Our upgrade process takes into account any feedbackreceived from insureds and compliance advisers and as a result we have added further guidance and additional N/A options for smaller firms and soleoperators to ensure that as far as possible, the requirements remain relevant to all types and sizes of business.Why would QBE like us to complete a questionnaire?QBE’s approach to underwriting is based on knowledge and understanding. By completing the questionnaire, you will help us to both better understandyour organisation and make more informed underwriting decisions when servicing your business. However, please be assured that your completedquestionnaire does not form a part of the contract of insurance.How long will it take to complete?You are invited to complete the standard form first. (questions are coloured yellow) This is an extract from the comprehensive form containingquestions relating to key business management issues that influence your exposure to negligence claims. We estimate a completion time of 1½ - 2hours for this part of the questionnaire.You can then elect to complete the comprehensive form which provides an evaluation of your overall business management standards against the fullstandard. We estimate a completion time of an additional 1½ to 2 hours for this part of the questionnaire.How will I benefit?You will receive a written report showing your responses to the questionnaire and QBE’s findings based on the criteria contained in the standard. Adetailed checklist will assist you in addressing issues that might require attention and a feedback process enables you to submit changes that youimplement as a result of this process. The process and reports are free of charge - a health check of this nature and complexity could cost as much as£3,000 from an independent consultant.Your report will also include a TCF summary which maps each of the risk elements in the questionnaire to one or more of the six TCF outcomes asfollows: l Customers* can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture. l Products and services marketed and sold (in the retail market) are designed to meet the needs of identified consumer groups and are targeted accordingly. l Customers are provided with clear information and are kept appropriately informed before, during, and after the point of sale. l Where customers receive advice, the advice is suitable and takes account of their circumstances.
  • 3. l Customers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and also as they have been led to expect. l Customers do not face unrealistic post-sale barriers imposed by firms to change product, switch provider, submit a claim, or make a complaint.* FSA terminology for these outcomes refers to consumers rather than customers indicating regulatory application to retail customers only. However, asour approach to risk assessment aims to be as holistic as possible, we believe that these principles should apply to all customers (as relevant)regardless of their retail, commercial or professional status, and we have therefore used the term customer rather than consumer and bracketed the term(in the retail market) for TCF 2.You will be able to use this summary to identify TCF gaps and subsequently chart your progress as you implement the corresponding recommendations.This will assist in demonstrating your commitment to embedding TCF into all aspects of the firms operations, management and culture.If my firm demonstrates that it has good practice management standards, what can I expect fromQBE?QBE rewards good management practices. Our underwriters take the results of the quality assurance process fully into consideration when settingpremiums. We seek to provide our preferred clients with discounts from the standard rating model developed for this insurance portfolio.What will happen if my firm is seen to have poor practice management standards?It is important to note that our approach is not to reprimand but to reconcile. You will be asked to provide confirmation that the recommendations madein our report have been implemented. Recommendations are prioritised according to whether we perceive them to be high, medium, or low risk in termsof the likelihood of leading to a PI claim. Each level of risk has a recommended timescale for completion for you to follow.Implementation of the recommendations is designed to help you improve your practice management standards over time and thus reduce the likelihoodof claims for our mutual benefit. Your underwriter will be updated of your progress on implementing the recommendations.How do I feed back information to you regarding our progress in addressing recommendations?As mentioned above, the report you receive will contain a checklist which provides you the opportunity to submit to us the changes that you implement.What if we already have a QA Standard?If you have a QA standard, then you will probably already comply with the vast majority of the requirements in the questionnaire. You are still likely tobenefit from completing the comprehensive version of the questionnaire however, as it brings together the requirements of various standards, some ofwhich you may not have considered with a single QA standard approach.Thank you for your participation. The author of this Questionnaire is QIEL. The author of this Questionnaire is protected under the UK Copyright law and under the relevant international treaties and conventions. Copyright vested in QBE Insurance (Europe) Limited. QBE European Operations is a trading name of QBE Insurance (Europe) Limited, no.01761561 (QIEL), QBE Underwriting Limited, no. 01035198 (QUL), QBE Management Services (UK) Limited, no. 03153567 (QMSUK) and QBE Underwriting Services (UK) Limited, no. 02262145 (QSUK),whose registered offices are at Plantation Place, 30 Fenchurch Street, London, EC3M 3BD. All four companies are incorporated in England and Wales. QIEL and QUL are authorised and regulated by the Financial Services Authority. QUL is a Lloyds managing agent. QMSUK and QSUK are both Appointed Representatives of QIEL and QUL.
  • 4. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireYOUR DETAILSYour PI BrokerYour Name:Date:FSA Firm Reference No:Company Name:PLEASE PROVIDE AN APPROXIMATE SPLIT OF YOUR BROKING ACTIVITIES: Personal % Commercial %A. General insurance (including pure protection products)B. Life, Pensions & Investments (including long-term care products)C. Portfolio / Wealth ManagementD. Home purchase / reversion products Activities Must Equal 100%May we contact you in case of queries? Yes No
  • 5. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireMANAGEMENT SYSTEMSMS1 Do you have an office manual / handbook or intranet site that details your firms management policies and operational processes by which you manage your business and provide services? G: You may have a compliance manual for FSA purposes but unless all aspects of your business where risks occur are covered, it would not be considered comprehensive in quality assurance terms. APER Principle 5 requires in any case that "An approved person performing a significant influence function must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function is organised so that it can be controlled effectively" and a manual / intranet or other management material will help in this regard. Sole operators should consider the development of a short handbook for business continuity purposes to facilitate management of the business in the event of unplanned absence due to illness or other unforeseen events. Treating Customers Fairly Indicator Œ Yes NoMS2 Do any personnel who work for you have ready access to these policies and procedures? G: This may be via access on a shared drive or availability of hard copies at specified locations. Again, sole operators should consider how access would be facilitated should events dictate that they were suddenly unable to continue to work. Treating Customers Fairly Indicator Œ Yes NoMS3 Do your policies and procedures cover: • organisation and management responsibilities; • strategic / forward planning; • financial management: • prevention of financial crime; • personnel management and supervision; • premises and facilities; • information technology and communications systems; • business continuity and disaster planning; • service delivery processes and standards; • treating customers fairly (TCF) objectives; • outsourced activities (e.g. marketing, IT support, compliance advice, telesales, claims handling, security, data management and other key supply services); • complaints procedures; • risk management? G: Risk management in this context refers to the holistic risk in providing financial services and in managing your firm overall. Completion of the comprehensive version of this questionnaire will help in your assessment of this. Separate manuals may be used for different procedures - for instance some firms have separate SYSC (Systems and Controls) and TC (Training and Competence) handbooks. Procedures should include specific targets where appropriate such as target times for issuing documents, dealing with claims, handling complaints, correcting errors, etc. Such targets will also support your TCF objectives and metrics. Treating Customers Fairly Indicator Œ All Some NoneMS4 Are all personnel advised of relevant communication channels and encouraged to make suggestions for improvements to the firms policies, procedures and supporting documents? G: This could be via an annual review, staff / team meetings, suggestion box, e-mail etc. Treating Customers Fairly Indicator Œ Yes NoMS5 Are all policies and procedures reviewed at least annually to identify areas for improvement and updated where necessary? G: A full audit of all processes should be undertaken to look at compliance with the procedures defined in the Office Manual, identify areas for improvement, and provide personnel with a further opportunity to suggest improvements. Those responsible for auditing your processes should be competent and where possible, independent of the area being audited to ensure objectivity. Audit frequency should be risk-based according to the likelihood of service failure or other risk management issues. Treating Customers Fairly Indicator Œ Yes NoMS6 Have amendments to the policies and procedures been recorded and dated so that personnel can see what changes have been made and when? G: Some form of revision history record should be used for this purpose. More extensive or important changes might need to be explained via a circular or at a briefing session or meeting. Treating Customers Fairly Indicator Yes No
  • 6. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireMS7 Are all such documents identified with its issue status (version number and/or issue date)? G: So that previous versions are not used by mistake. Superseded versions should be discarded and/or marked obsolete. Treating Customers Fairly Indicator Yes NoMS8 Do you have a system to ensure that those who work for you are placed under a continuing obligation to comply with your policies and procedures? NB: The N/A option may only be selected if you are a sole operator. Treating Customers Fairly Indicator Yes No N/AMS9 Are important operational precedents including all customer-facing literature subject to document control processes that include: • design, approval, and revision by competent, approved personnel; • immediate and effective withdrawal of out-of-date versions to prevent inadvertent use; • clearly marked document and version identities linked to an issue control list/database; • appropriate read-write access, print and issue controls? G: Such documents will include but not be limited to: financial promotions, disclosure documents, terms of business, some suitability precedent letters, and scripts for use in marketing and non-advised sales processes. Firms should identify their own list of similarly important documents and ensure these are subject to the document control processes above. Treating Customers Fairly Indicator Œ  Ž All Some NoneMS10 Have you established record keeping requirements and retention periods for all records necessary to demonstrate effective operation of both your service delivery processes and support functions? G: SYSC now only requires that records should be retained for "as long as is relevant for the purposes for which they are made", although, the minimum retention period for MiFID business is 5 years, extended to indefinitely for pensions including transfers, opt-outs and FSAVC business. Firms should therefore develop a risk-based schedule of records to be kept, their retention periods and the person/s with authority to arrange disposal or destruction. Personnel should be made aware of record retention policies as appropriate to their work. Treating Customers Fairly Indicator Yes No
  • 7. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireORGANISATION & STRUCTUREOS1 Is there a written description of your management structure that shows clear lines of responsibility, e.g. a family tree or organisation chart? NB: The N/A option may only be selected if you are a sole operator or if only Partners work for the firm and their reporting relationship is defined in the Partnership agreement or equivalent. Treating Customers Fairly Indicator Œ Yes No N/AOS2 Have you allocated and defined management responsibilities for: • ensuring compliance with legislative and regulatory requirements; • liaison with the FSA, including full disclosure and prompt, accurate RMAR reporting; • financial management, client money management, and prevention of financial crime; • risk assessment and management; • assessing TCF adherence and implementing appropriate policies, controls and metrics; • systematically monitoring relevant information and guidance produced by government, regulatory, professional and trade bodies; • implementation and maintenance of your management systems; • provision of timely, accurate and meaningful management information; • complaints procedures, handling and reporting; • personnel management including recruitment, induction, training and competence; • audits of your entire management system; • if appropriate, overall responsibility for the firms insurance mediation business; • allocation and oversight of all management functions listed in this question? G: Each of the above aspects / roles should have representation or be addressed at management / board level. In smaller firms, one person may undertake several roles. NB: The N/A option may be selected if you are a Sole Operator with no employed or contracted personnel that might undertake these management roles. Treating Customers Fairly Indicator Œ All Some None N/AOS3 Does each of the roles in OS2 have clearly defined terms of reference and/or objectives and the individuals concerned, the competence and capacity to fulfil these roles effectively? G: Possibly defined in a Job Description or Management Role. Appropriate management training should be considered to ensure the necessary competence for these roles. Even for sole operators, identification of key management tasks might assist in ensuring key weekly, monthly, quarterly and annual management tasks are carried out promptly. Treating Customers Fairly Indicator Œ Yes NoOS4 Do you have regular partners’ or management meetings for which agendas are produced and minutes or notes recorded and circulated? G: For example, monthly, bimonthly or quarterly meetings of all available partners / managers or a committee appointed to deal with management issues such as finances, planning and risk management, compliance, achievement of quality standards (including TCF), review of industry developments (including information and guidance from recognised sources), third party performance, complaints, personnel and administration. Management Information required for such meetings should be defined and must be timely such that effective decision making based on current information can be undertaken. It is essential that where problems are identified, the corrective measures agreed at such meetings are recorded and monitored to ensure the action is taken and more importantly, is shown to be effective. Sole operators should take time out to review such issues and notes would reflect their personal action points. Treating Customers Fairly Indicator Œ Yes NoOS5 Do you adhere strictly to supervision levels and processes that have been established for your personnel and/or products? G: This could be for each individual or type of role, individual product types, for instance all high-risk product recommendations requiring supervisory checks before issue. Supervision may be conducted in teams or on a one-to-one basis but in any event should be conducted at a risk-based frequency and consider issues such as sales vs. targets, quality of advice / file review feedback, complaints and other customer feedback, achievement of KPIs and development objectives etc. Supervision in respect of ARs is dealt with later in this questionnaire. There is no N/A option as even sole operators should consider peer review or independent compliance checks for their work. Treating Customers Fairly Indicator Œ  Yes No
  • 8. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireOS6.1 Have you defined the competence levels for supervisors in relation to: - i) technical knowledge? G: This may include specific qualifications, experience and practical skills. Care should be taken not to breach age discrimination legislation and this can be achieved by specifying the required attributes rather than length of experience or other age indicators. NB: The N/A option may only be selected if your business model does not involve supervision of less-experienced personnel. Treating Customers Fairly Indicator Œ   Yes No N/AOS6.2 ii) supervision skills? G: Those that have technical experience do not necessary automatically make good supervisors as different skill sets are required for each. Supervision requires skills in effective delegation, leadership, coaching, counselling, mentoring, assessment, feedback etc., and these should be addressed as part of the recruitment, induction and development processes. There is no N/A option for this question as even sole operators require self-supervision skills such as time management, CPD planning, objective review skills etc. Treating Customers Fairly Indicator Œ   Yes No
  • 9. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireFORWARD PLANNINGFP1 Do you have a forward plan for business development that addresses key issues and objectives including: • overall strategic plans; • marketing and promotion; • IT, communications, and other aspects of your business infrastructure; • management, supervision and staffing; • skills and training; • essential resources in terms of people, finance, premises, and facilities? Treating Customers Fairly Indicator Œ All Some NoneFP2 In developing the plan, has consideration been given to: • the firms strengths and weaknesses and its opportunities and threats (SWOT analysis); • political, social, economic, technological, legal, and ethical issues and other trends likely to impact upon the firm (PESTLE analysis); • aspirations of the partners and other personnel; • the provision of timely, accurate and relevant management information; • feedback from clients about their future needs and perceptions of the firm and services? G: Business development plans must always be reviewed in light of quality and risk management objectives such as TCF goals to ensure that any likely detriment to customers is minimised. Information such as the FSAs Financial Risk Outlook document might also be useful background information for development purposes. Treating Customers Fairly Indicator Œ All Some NoneFP3 Are the development plans and projects detailed in your business plan fully costed? G: That is, outline costs identified for each development initiative so that these can be included in the firm’s income and expenditure budget for the same period. Treating Customers Fairly Indicator Yes NoFP4 Does the plan address at least a three-year period? G: The current year should be in detail but the following two years could be in outline only. Treating Customers Fairly Indicator Yes NoFP5 Has everyone who works for your firm been made aware of the contents of the plan? G: Either via a summary document or provision of a copy of the plan itself (as appropriate to the level of understanding and role of the individual). Group or individual presentation / discussion of the plans objectives and how these tie in to individual and team goals should be undertaken. NB: The N/A option may only be selected if personnel are not employed or contracted. Treating Customers Fairly Indicator Œ Yes No N/AFP6 Is the business plan subject to regular monitoring to assess and record whether it is on target to achieve the objectives set, and to agree appropriate actions to progress the plans further? G: For example, via regular meetings of the partners, management team or possibly a small committee established for this purpose. Monitoring and review will be most effective if the goals defined are SMART i.e. Specific Measurable, Achievable, Realistic, and Time- related. Use of pertinent management information (MI) such as sales achievements against targets, products not-taken up, cancellations and lapses will assist in assessing both commercial success and achievement of your TCF goals. Treating Customers Fairly Indicator Œ Yes NoFP7 Is the plan subject to full review and update at least annually to take into account changes in the business environment and to ensure the planning horizon remains at three years? G: This would include a reassessment of the factors listed in FP2 and update of the document to include new development initiatives. Treating Customers Fairly Indicator Yes No
  • 10. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireFP8 Do you have a documented business continuity plan which addresses risk assessment, risk avoidance, pre-disaster planning, incident handling and recovery? G: Impact events for consideration include fire, flood, electrical failure, terrorism, computer viruses, hackers, faulty maintenance, pandemics, long-term illness of key personnel etc. Sole operators should consider how their business would be managed if they were take ill unexpectedly such that work was impossible. Contingency plans should consider IT and data restoration, communications, premises, facilities, equipment, personnel, insurance issues, and the implications for clients and outsourced services. Consideration should be given to TCF principles when planning continuity arrangements. Treating Customers Fairly Indicator Œ Yes NoFP9.1 Has the business continuity plan been:- i) reviewed within the last 12 months? G: To consider whether the plans in place are still appropriate. Treating Customers Fairly Indicator Yes NoFP9.2 ii) tested within the last 12 months? G: Testing may be limited to specific areas such as data retrieval and restoration on the basis of cost-benefit analysis. If tested, building inaccessibility should be attempted with little or no warning for a true test of efficacy (in the same manner as for fire evacuation tests). Treating Customers Fairly Indicator Yes NoFP9.3 iii) updated where necessary and relevant personnel advised of the changes made? Treating Customers Fairly Indicator Yes No
  • 11. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireFINANCIAL MANAGEMENTFM1 Do you have an annual budget for both income and expenditure? G: The budget should only be finalised once all projects in the business plan have been agreed upon and costed so that it is as accurate as possible (see also FP3). Treating Customers Fairly Indicator Yes NoFM2 Is the budget produced prior to, or near to the start of your financial year? G: Management Information on variances must be current so figures need to be in place at the start of new budgeting period. Treating Customers Fairly Indicator Yes NoFM3 Do you produce variance reports of actual income and expenditure compared to the budget? G: Budget variance should be monitored at least quarterly but preferably monthly at management level so that any corrective action measures necessary can be agreed and acted upon promptly. Treating Customers Fairly Indicator Yes NoFM4 Do you produce a documented cash flow forecast for at least the same 12-month period? Treating Customers Fairly Indicator Yes NoFM5 Do you produce variance reports of actual cash flow compared to the forecast? G: Cash flow variance should be monitored at least quarterly but preferably monthly at management level so that any corrective action measures necessary can be agreed and acted upon promptly. Treating Customers Fairly Indicator Yes NoFM6 Are both income and cash flow variance reports subject to regular review to monitor performance? G: This would be monthly or quarterly for review at Partnership / Management level. Treating Customers Fairly Indicator Yes NoFM7 Have you established other key financial reports, data or financial ratios or indicators that you require to monitor the financial health of the firm and are these also subject to regular review by management? G: It is for your firm to decide what indicators might be useful but these might include for instance, individual or team performance figures, cost-centre analysis, and sales volumes vs. targets (the latter of which might be used as a TCF indicator), conversion and lapse ratios as well as overall indicators such as liquidity ratios. Capital adequacy checks as required by either MIPRU or PRU-INV should be included as a key indicator (see also FM9). RMAR data should be checked monthly in any case. Treating Customers Fairly Indicator Œ Ž   Yes NoFM8 In respect of your debtors and creditors, have you defined systems and responsibilities for: • monthly review of aged debtor and creditor reports; • payment of premium and other debtors in accordance with agreed terms; • premium, fee, commission and creditor management with fair methods of pursuance; • write-off of bad debts after a defined period by authorised personnel only? G: Loans / credit afforded for premiums owed may only be given on non-statutory trust accounts. If credit is given, non-payment of fees or premiums might indicate some form of dissatisfaction with the service/product or could indicate the risk is not on cover, both of which should be investigated. Treating Customers Fairly Indicator Œ  All Some NoneFM9 Is your capital resource monitored at management level and independently audited at least annually? G: Capital Adequacy Requirements are defined in MIPRU 4.2 (General Insurance and Home Finance Mediation) and PRU-INV 13 (Investment Firms). Treating Customers Fairly Indicator Œ ‘ Yes No
  • 12. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireFM10 Is the scope and cover of your Professional Indemnity Insurance (PII), or comparable guarantee, reviewed at least annually taking into account: • regulatory minimums; • the financial products and services provided; • customer / client groups; • broker / insurer advice; • recent claims / notifications; • market trends? G: Review might be conducted as part of the annual PII brokerage / renewal process. Regulatory minimums are defined in MIPRU and PRU-INV however firms need to assess the exposures faced from their own client base, transactions undertaken and other knowledge. Treating Customers Fairly Indicator All Some NoneFM11 Are your accounts independently audited (or otherwise verified if you are audit-exempt) each year? G: The requirements and exemptions are explained in SUP 3 of the FSA handbook. Firms that handle client money cannot be exempted based on the size of the firm and Ltd. Companies and LLPs must have an independent audit in any case. Even if an audit is not a legal or regulatory requirement, firms should consider independent verification of their finances as a sound risk management measure. Treating Customers Fairly Indicator Yes NoFM12 Do you have controls in place to review the suitability of your chosen bank(s) for the firms money, and if held, client money? G: Suitability in this context should include both service standards and financial stability. Such factors should be taken into account if changing / appointing new banks in future. The FSA has published on its website a list of suitable banks for use by those firms it regulates. Particular care should be taken with foreign and off-shore banks and diversification should be considered if the amounts held warrant such action. Treating Customers Fairly Indicator  ‘ Yes NoFM13 Have you established the necessary reporting systems to comply with RMAR and regulatory breach reporting requirements? G: It is important to record information centrally so that analysis can be undertaken and information can be provided promptly when requested by authorised bodies such as the FSA. Content and deadlines should be strictly adhered to otherwise regulatory breaches will occur. The FSA must be notified immediately if professional indemnity or capital adequacy requirements cannot be met. Treating Customers Fairly Indicator  ‘ Yes No
  • 13. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireCLIENT MONEYCM1.1 What arrangements do you use when dealing with client money: i) risk transfer (covered by written agreements with insurers) for all business conducted; G: Questions CM2 - CM9 largely reflect FSA requirements. If required, further details should be obtained from the Client Assets Sourcebook (CASS). Questions CM1.2, 1.3 and 2-9 are N/A if all of the business you conduct is covered by risk transfer. Treating Customers Fairly Indicator Yes NoCM1.2 ii) statutory trust client account/s; G: Your FSA permissions must reflect this. Question CM3 is N/A if you answer "Yes" to this question. Treating Customers Fairly Indicator Yes NoCM1.3 iii) non statutory trust client account/s? G: Your FSA permissions must reflect this. Question CM3 is N/A if you answer "No" to this question. Treating Customers Fairly Indicator Yes NoCM2 Do your firms client money procedures define the following essential elements: • establishing the appropriate client accounts and receiving written notification from your bank regarding the status and identification of those accounts; • ensuring that the appropriate level of capital is held as security; • handling and holding of client monies by employees, representatives and ARs; • payments into and out of client bank account(s); • dealing with receipt of client entitlements (e.g. claims payments) including prompt notification and allocation; • handling of mixed remittances and withdrawal of non-premium amounts; • client account calculation, reconciliation and verification to the bank statement and correction of discrepancies as soon as possible; • clearly defined policies for charging, transfer of client monies, treatment of interest to which informed client consent is obtained; • withdrawing your commissions; • net account settlement with insurers; • dealing with unclaimed client monies? G: Full details can be found in the Client Assets Sourcebook (CASS) and relevant Prudential Standard for your firm. It is essential to ensure you have a written acknowledgment from your bank and that the contents accurately describe the status of the accounts for your firm. Treating Customers Fairly Indicator  ‘ All Some None N/ACM3 Have you in informed your clients about the operation and risks of a non-statutory trust account and obtained consent from relevant clients for the use of such an account when dealing with their money? G: CASS 5.4 describes the requirements for operating a non-statutory trust account and the contents of the trust deed that must be in place. Treating Customers Fairly Indicator Ž  ‘ Yes No N/ACM4 Is there a nominated Partner/Director with responsibility for ensuring processes are kept up to date in line with changes to Client Money Rules and formal guidance on the subject? G: Day-to-day duties may be delegated but overall responsibility must still rest with the nominated Partner/Director. Treating Customers Fairly Indicator Œ  ‘ Yes No N/ACM5 Are the up-to-date Client Money Rules and supporting guidance available for reference by all personnel involved in client money transactions? Treating Customers Fairly Indicator Yes No N/ACM6 Have those responsible for dealing with client monies had specific training in respect of this activity? Treating Customers Fairly Indicator Yes No N/A
  • 14. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireCM7 When client money is received, is it: • recorded in a manner that ensures traceability to an individual policy number or other unique identifier; • banked or forwarded to a separate Accounts function for depositing and management; • banked or forwarded within 1 working day once received at your office; • forwarded no later than 3 working days once received from clients by any field-based personnel / ARs? Treating Customers Fairly Indicator  ‘ All Some None N/ACM8 Have any issues raised by your Auditor in respect of either client money processes or amounts held, been remedied or otherwise addressed and where appropriate corrective action measures put in place to prevent reoccurrence of similar problems? Treating Customers Fairly Indicator  ‘ Yes No N/ACM9 Have you in place the necessary controls to immediately inform any clients affected and the FSA, in the event that you are unable to perform any client account calculations, reconcile accounts or make good any shortfall within the 25 day regulatory target? Treating Customers Fairly Indicator Œ Ž  ‘ Yes No N/A
  • 15. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnairePEOPLE MANAGEMENTPM1 Are pre-recruitment controls in place such that agreed policies in relation to the following are understood and followed: • responsibility for co-ordinating the recruitment process; • review of the job role and person specification and update if necessary before release; • authority to promote the role and its associated benefits via appropriate channels; • selection and approval of any recruitment agencies used? G: Person specifications should always be reviewed before advertising to ensure that the stated qualifications, skills and experience reflect the overall competency level required to provide the firms customers with quality advice and/or service. Care should be taken not to breach age discrimination legislation. NB: The N/A option may only be selected if there are no staff and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. *Partner level includes directors, co-owners or other senior / equity management roles. Treating Customers Fairly Indicator All Some None N/APM2 Are selection processes robust, objective and transparent such that the following can be demonstrated: • initial review of all applicants against the person specification; • short-listing or rejection based on meeting the criteria in the person specification; • communications with all candidates regarding their success or failure to meet the criteria; • interview against set criteria including appropriate tests/measures to assess competency; • final selection based on achievement of the best results overall; • communications with interviewees to discuss an offer or reject their application? G: Whilst recruitment processes must be fair and transparent, the key objective is to ensure the process is sufficiently robust such that only fit and proper people are employed by your firm. NB: The N/A option may only be selected if staff are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator Œ  All Some None N/APM3 Are records retained of all selection stages showing clearly why candidates were accepted or rejected? G: This is to assist in any potential claim of discrimination or request for feedback. Such records should not be retained more than 12 months in accordance with data protection rules. NB: The N/A option may only be selected if staff are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator Yes No N/APM4 Are each of the required competencies to fulfil the job role verified as part of the selection process and records of such verification stages kept? G: This might be via interview, verbal, written or computer-based testing etc. NB: The N/A option may only be selected if staff are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator  Yes No N/APM5 Are copies of certificates obtained to prove achievement of education and qualifications? NB: The N/A option may only be selected if staff are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator   Yes No N/APM6 Are references always obtained prior to the appointment of new personnel? G: References spanning 5 years, and a 10 year (or complete) employment history obtained. Any gaps in the employment history should be investigated. FSA approval should never be relied upon in place of your own due diligence. NB: The N/A option may only be selected if staff are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator   Yes No N/A
  • 16. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnairePM7 Are fitness and propriety checks undertaken in appropriate circumstances and records of such checks retained? G: This is to address financial soundness and criminal background checks to ensure that personal and financial circumstances and perceived integrity are unlikely to impact upon performance. Whilst the process should be applied to all personnel via a process of self- certification, additional background checks with the CRB or a credit reference agency might be undertaken for Appointed Representatives and any other sub/contract personnel and business partners as well as all managers and staff directly involved in service delivery and/or with access to large amounts of customer data. Particular attention should be given to offences of dishonesty, fraud, financial crime or other offences under legislation relating to banking and financial services, company law, insurance, and consumer protection. NB: The N/A option may only be selected if staff or third parties are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator   Yes No N/APM8 Are there set processes, checklists and records of induction training and where appropriate, skills verification, for (as appropriate): • new employees; • employees returning to work after a long absence; • employees changing roles? G: Apart from the routine administration of the first day, induction should cover all key policies and processes and should therefore be spread over a suitable period. Skills that cannot be fully assessed during the selection process should be verified, for instance via supervised customer visits/ interviews, to see if further training is needed. NB: The N/A option may only be selected if staff are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator Œ   All Some None N/APM9 Is any testing / verification performed during or after induction to ensure that individuals have understood the policies and procedures they are required to abide by? G: The benchmarks / criteria used to verify competency should be defined and evidence recorded in the same manner as PM19. NB: The N/A option may only be selected if staff are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator Œ   Yes No N/APM10 Does each person who works for your firm (all employees, directors / partners and contract personnel) have a documented job / role description or specification? NB: The N/A option may only be selected if staff are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator  Yes No N/APM11 Is there a corresponding person specification that details the skills, knowledge, experience and/or competencies required to fulfil the role? G: The person specification may be part of the job description or defined elsewhere, e.g. in a recruitment advertisement or recruitment agency specification. Reference to the CIIs or FSSCs Competency Frameworks may be useful in developing Job Roles or deciding whether existing ones are adequate. NB: The N/A option may only be selected if staff are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator  Yes No N/APM12 Are Job Descriptions / Management Roles reviewed at agreed frequencies to ensure they are kept up to date? G: This review might be conducted, for instance, during an annual development review. NB: The N/A option may only be selected if staff are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator Yes No N/A
  • 17. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnairePM13 Does each person who works for the firm have an annual review to: • assess their performance and agree targets for future performance; • assess understanding of key policies and any interim changes made; • consider any changed circumstances that might impact upon their suitability for their role and update corresponding declarations on fitness and propriety; • look at achievement of objectives and to set new objectives; • identify training and development activities necessary to achieve the objectives set? G: Individual objectives should support overall business objectives in terms of growth, development, risk management, quality, TCF etc. Changed circumstances relate to fitness, propriety and suitability generally such as changed personal/financial circumstances that might impact upon a persons performance - self-certification and background checks as considered appropriate should be repeated taking care not to fall foul of discrimination laws. The individuals ethical behaviour should be considered in any case as part of their overall performance. Training and development principles apply to all partners, directors, managers and staff including sole operators. All aspects need not necessarily be addressed during one review if other review processes are in place, for instance a separate review to consider CPD requirements and achievements might be in place. Reference to the CIIs or FSSCs competency frameworks may be useful in deciding which competencies are necessary for the role. Treating Customers Fairly Indicator   All Some NonePM14 Are confidential records of the reviews produced, detailing agreed actions relating to each aspect listed in PM13? G: The Data Protection Act requires such details to be kept confidential and made only available to authorised personnel. Under this Act, individuals may also request to see copies of records on file about them at any time. Treating Customers Fairly Indicator Yes NoPM15 Do you monitor the performance of all individuals between annual reviews and identify measures to maintain competency where necessary? Treating Customers Fairly Indicator   Yes NoPM16 Are training and development plans and controls in place to ensure that: • all individuals are trained and developed to fulfil their role effectively; • training and development is appropriate to the job role; • training is implemented in accordance with required timescales; • management, supervision and support skills are attained as well as operational competency; • personnel understand the policies and procedures they are required to abide by; • compulsory CPD is attained in appropriate circumstances; • the company has the necessary skills overall to fulfil its business objectives? G: It is important that training plans are developed with the aim of achieving strategic and business goals and not just to fulfil compliance requirements. Legal and regulatory understanding should extend to areas such as prevention of financial crime, health and safety law, equality in the workplace, data protection and compliance with FSA rules including TCF principles. Treating Customers Fairly Indicator   All Some NonePM17 Do you monitor the achievement of all training needs identified including compulsory qualifications (those defined by the FSA, FSSC or the firms own standards), and any firm-wide training mandates to ensure that they are undertaken within any defined time limits? G: Training needs will be those identified during the annual development review and apply to all sizes of firm including sole operators. Company wide mandates might apply for instance to tax and benefits updates whereby an annual briefing for all staff is mandated to take place promptly following annual budget announcements. Treating Customers Fairly Indicator   Yes NoPM18 Do you evaluate any training undertaken to ensure that it has achieved the required results: • immediately afterwards to ensure that the necessary knowledge or skill has been gained; and • after an appropriate period of time to ensure that the new knowledge or skills is being applied effectively and is having the intended effect on the individuals performance? G: This will also assist your firm in assessing whether its investment in training and development is cost-effective and contributing to its business goals. Evaluation should be applied to induction training as well as ongoing training during the employment lifetime. Treating Customers Fairly Indicator   All Some None
  • 18. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnairePM19 Are competency assessments recorded to demonstrate when competency was attained and what criteria / benchmarks were used to make this assessment? G: Competency assessments should be appropriate to the skills/knowledge being assessed. Written tests might be appropriate to test knowledge but accompanied visits or interviews with customers would be more appropriate to assess both knowledge and practical skills. Treating Customers Fairly Indicator   Yes NoPM20 Are comprehensive training and competency records kept for each person showing all external and internal training undertaken? G: Training records should include all significant development activities - external courses, internal briefing sessions, cascade training etc. related to the job role plus appropriate admin, IT, supervisory and management training. In-house testing and re-assessment should also be applied in respect of key policies such as security, financial crime, whistle-blowing, TCF, data protection etc. Treating Customers Fairly Indicator Yes NoPM21 If personnel fail to meet the defined levels of competency required for their job are they subject to the following controls (as appropriate): • closer supervision; • additional training as necessary; • change of / restrictions to job role; • appropriate warnings; • dismissal in extreme circumstances? G: Care should be taken when following the disciplinary route to ensure that all legal requirements are fulfilled and appropriate records kept in support. Advice from your solicitors or employment advisers in such circumstances should be sought where appropriate. Treating Customers Fairly Indicator   All Some NonePM22 Do you regularly review remuneration policies and levels to ensure that they support overall business objectives and that there are no adverse trends that might impact upon recommendations made to your customers? G: The review should include comparison of sales personnel in terms of commission levels earned and risk carriers and/or products favoured etc. Even where no commission or bonus structure is in place, consideration should be given to other benefits in kind that might impact upon the choice of products and/or insurer. Such considerations might be included in a full review of Conflicts of Interest and TCF issues that might apply and achievements that might be rewarded to support your firms policies in this regard. Treating Customers Fairly Indicator Œ Yes NoPM23 Do you have a whistle-blowing policy which can be used by all people who work for or represent your firm? G: Both for best practice and FSA purposes. Treating Customers Fairly Indicator Œ Yes NoPM24 Do you have established channels that facilitate two-way communication between staff and managers? G: This might include for instance, regular team, function, branch or whole company meetings, social events, use of e-mail / memos, notice boards, suggestion boxes, intranet, etc. NB: The N/A option may only be selected if staff are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator Œ Yes No N/APM25 Do communication channels or other forums include the systematic sharing of learning events including: • cascading training undertaken by individuals; • circulating guidance from regulatory, professional, and other authoritative bodies; • sharing knowledge of disciplinary and court decisions against firms and individuals; • informing relevant personnel about corrective and preventive action measures instigated to improve policies, processes, attitudes, compliance and risk management in light of the above? NB: The N/A option may only be selected if staff are not employed and the business plan indicates that recruitment of personnel (staff or partner level) is not likely in the near future. Treating Customers Fairly Indicator Œ All Some None N/A
  • 19. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnairePM26 Do you have an up-to-date Equality and Diversity Policy that is reviewed at least annually and updated where necessary? G: The principles of equality apply to the treatment of staff, Partners/Directors, clients and third parties and this should be reflected in the Policy content and any supporting procedures. The annual review process should ensure that the policy is being implemented effectively (see RM11). Treating Customers Fairly Indicator Œ Yes No
  • 20. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireINFRASTRUCTUREINF1.1 Do you have documented policies and procedures to ensure compliance with legislation relating to:- i) health and safety; G: This includes training and consultation with staff, risk assessments and reports, controls for safe use of equipment and computers, stress management, accident reporting, first aid arrangements, etc. Treating Customers Fairly Indicator Yes NoINF1.2 ii) fire regulations; G: For example, ensuring that a current fire risk assessment is available, controls agreed and conditions complied with, fire alarm tests are undertaken, emergency procedures are documented and understood, fire fighting equipment is regularly checked, etc. Treating Customers Fairly Indicator Yes NoINF1.3 iii) disability discrimination? G: Reasonable adjustments should have been made by October 2004 to ensure accessibility to your services by disabled clients and employees. Firms need to consider accessibility of documents, information available electronically such as that provided via a website, and telephone services including distance marketing and sales. As appropriate firms might need to have arrangements in place (outsourced if necessary) to provide documents in large print and Braille for the visually impaired, have in place induction loops for the audibly impaired, and ensure that any website has been assessed for compliance (freely available tools such as ‘Bobby’ are available for this purpose). If disabled clients are provided with home-based services, charges should not be made. Treating Customers Fairly Indicator Œ Yes NoINF2 Do you use one or more proprietary or tailored software packages designed specifically for the products you broker which deal with (as appropriate to your work): • precedent document management; • product research; • policy summary, key features document and illustration management; • inception, adjustments and renewals; • back office administration; • claims handling; • accounts management; • retrieval and reproduction of documents; • diary of key dates (for reviews, renewals etc)? Treating Customers Fairly Indicator All Some NoneINF3 Do you have support arrangements in place for all hardware and software used in day-to-day business? Treating Customers Fairly Indicator Yes NoINF4 Do you have in place security measures and systems designed to prevent unauthorised access to your premises, any restricted areas, files and data including: • office / restricted area access via keys, key-codes or buzzers/intercoms; • reception sign-in and out of all visitors with supervision / escorting as appropriate; • locking filing cabinets containing customer/other confidential data when not in use and at close of business; • having a clear desk policy to reduce the risk of data being lost, stolen or being seen by unauthorised persons; • having written policies and procedures in respect of premises and data security; • training all existing and new staff in your policies and procedures and the risks of poor security? G: Installing alarms or CCTV may also act to deter intruders. Visitor arrival and departure records would also assist in the event of emergencies if muster is necessary. Locking fire-proof cabinets will assist in preventing the spread of fire. Treating Customers Fairly Indicator Œ  All Some NoneINF5 Are you registered under the Data Protection Act? G: Registration details can be obtained from the Information Commissioners website. Treating Customers Fairly Indicator Œ  Yes No
  • 21. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireINF6 Is the data held by your Company reviewed regularly (at least annually) to ensure that it is up to date and used only in accordance with your DPA permissions and with the data protection principles? G: The eight data protection principles are listed in Schedule 1 to the Data Protection Act. Treating Customers Fairly Indicator Œ  Yes NoINF7 Are your computer systems and records subject to: • controlled access rights; • user name and password protection; • virus protection; • firewall/s; • control and encryption of any data allowed to be stored on portable devices and home computers; • control and encryption of any data transferred to third parties (and only where permitted), or use of secure internet links, registered or recorded mail as appropriate; • data copying prevention measures? G: Access controls should be established at computer and programme levels at least. Further controls might be needed for certain sensitive folders or files. Personnel should be trained on the importance of password structure, regular update and protection such as not sharing or writing down. Encryption or other protection measures should be applied to data held on laptops, memory sticks, CDs and other portable devices. A log of portable devices and encryption controls should be held to this effect and audited to check for losses. Prevention of data copying might also be controlled by disabling USB ports and CD writers. Treating Customers Fairly Indicator Œ  All Some NoneINF8 Are controls in place to: • review and update controlled access rights; • frequently change user names and passwords; • review and update virus protection and firewall/s; • assess the effectiveness of data security measures and update them as required? Treating Customers Fairly Indicator Œ  All Some NoneINF9 Do you back-up all business-critical data daily? G: If back-ups are conducted centrally, it is essential to ensure everyone stores their data in the correct area on the computer. Apart from transactional records, data held on MS Office or equivalent and Accounts packages etc should also be subject to regular back-up. Treating Customers Fairly Indicator  Yes NoINF10 Is back-up data produced, handled and stored in manner which prevents loss, theft, or damage? G: Back-up data should be encrypted and stored securely such as in a fireproof or lockable safe, preferably off-site with a trusted member of staff or third party. Such data should not be left in cars or unlocked briefcases / handbags etc and if entrusted to a third party, their storage process should be verified before appointment. Treating Customers Fairly Indicator Œ  Yes NoINF11 Does your firm have a documented internet and email policy which dictates: • acceptable and unacceptable uses of the internet and e-mail for both business and personal use; • any monitoring systems in place; • the action that will be taken in the event of a breach? G: Best practice advocates that web-based e-mails, instant messaging, social networking sites and file sharing are blocked to prevent the loss or theft of data without the firm knowing. Internet and e-mail access may not be necessary for all job roles and might be restructured to reduce risks. If monitoring is employed, staff must be made aware of this in advance in line with the Employment Practices Data Protection Code. Treating Customers Fairly Indicator Œ  All Some None
  • 22. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireINF12 Do you have an outsourcing policy and supporting procedures that define the controls to be applied to the management of third parties with access to data including: • initial vetting to ensure adequate competence, capacity and if relevant, authorisation to perform outsourced functions; • agreement of disclosure and reporting requirements having due regard for confidentiality and data protection law; • agreement of monitoring requirements (by the firm, its auditors, the regulator and any other competent authorities as necessary); • formal contracts in place for all outsourced service providers setting out the rights and obligations of each party; • assessing the standard of performance of the third party against the agreed service level criteria; • instigation of appropriate action should service standards fail to meet agreed criteria in a manner which is not detrimental to the continuity or quality of service provided; • as appropriate, establishment of business continuity arrangements, their review and testing? G: SYSC 8.1.5 gives examples on non-critical services that might, for regulatory purposes, be excluded from such considerations Sound risk management however advocates that these principles be applied in all cases but in a risk-based manner. Notification to the FSA may be necessary where your firm intends to rely on a third party for the performance of a critical operational function (see SUP 15.3.8). The firm remains overall responsible for compliance and risk management in such circumstances. Treating Customers Fairly Indicator Œ  Ž   ‘ All Some NoneINF13 Do you have controls in place to ensure equipment relied upon to provide your service is maintained in good working order? G: Utility provision and business continuity should also be considered in this context. Treating Customers Fairly Indicator Yes NoINF14 Do you maintain a list/database of product providers for each type of insurance, investment and mortgage/home finance product you deal with and is this available to relevant employees and representatives of the firm? G: The same list/s could be used for issue to customers if requested in response to your disclosure that such lists are available for services based on limited research. NB: The N/A option may only be selected if you are a tied broker with one product provider. Treating Customers Fairly Indicator Œ Ž Yes No N/AINF15 In respect of the product providers you use, do you have set processes and supporting records for: • vetting and selection against set criteria; • establishing contracts and service level agreements; • performance monitoring against set criteria; • collecting data that contributes towards management information including TCF indicators; • review of financial standing and any other risk assessments undertaken; • regular update of their product details? G: Product providers include those who develop, manage or package insurance or investment products, mortgages and home reversion/purchase plans. Vetting and performance monitoring should be against specific quantitative and qualitative criteria that reflect your firms own quality standards such that customers can expect the same level of service from third parties as they would when dealing with your firm directly. The criteria used should be recorded and evidence of benchmarking each product provider against those criteria retained. NB: The N/A option may only be selected if you are a tied broker with one product provider. Treating Customers Fairly Indicator  Ž  ‘ All Some None N/AINF16 If a panel approach is used to address whole market coverage, do you review the panel at least quarterly in light of changing market circumstances, customer feedback and performance monitoring information? G: Criteria for inclusion on the panel should be defined and evidence of benchmarking against the criteria retained. Review should be conducted at management level as part of your regular management meetings. NB: The N/A option may only be selected if you are a tied broker. Treating Customers Fairly Indicator Œ Yes No N/AINF17 Where product choice is from a restricted number of providers, are you able to issue a list of those providers to your customers if requested? NB: The N/A option may only be selected if you are tied to one product provider. Treating Customers Fairly Indicator Œ Ž Yes No N/A
  • 23. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireINF18 In respect of any customer documents, information or other property entrusted to your care, do you have systems in place to: • evidence the date received, and acknowledge receipt if requested; • record the details and location (if relevant) of any such documents/property held ensuring traceability of such items to the customer; • keep the property / information securely and in accordance with any conditions stipulated by the customer; • use mandates, authorisations and other property only as instructed; • only transfer data to another party if your firm has been given authority to do so and then apply appropriate security measures; • notify the customer of any problems with their documents/property; • return the items to the customer if requested/necessary or otherwise dispose of information securely; • if appropriate, reconcile any custodial items in line with agreed frequencies? G: Particular care should be taken with customer mandates and financial details. Fitness and propriety checks are essential for those to whom such information and authority is entrusted. Treating Customers Fairly Indicator Œ  All Some NoneINF19 Do you employ Appointed Representatives (ARs)? G: Questions INF20-24 are N/A if you answer "No" to this question. Treating Customers Fairly Indicator Yes NoINF20 Do you have a written contract with your ARs stating that they must abide by: • your management systems; • agreed customer service standards; • regulatory requirements; • any commercial restrictions; • if appropriate, client money controls including banking arrangements, risk transfer and subordination arrangements and authority to pay claims or refund premiums; • record keeping and submission arrangements; • your T&C requirements including attendance of any training mandated by your firm; • contractual requirements to notify you of other firms with which they work? G: The firm should consider what records need to be held centrally for monitoring TCF adherence and so that in the event of departure of the AR, valuable information is not lost and service standards are not adversely affected. You may also need to organise registration with the FSA if the AR is not already approved. Failure to have contracts in place is a criminal offence and can result in imprisonment. Treating Customers Fairly Indicator Ž   ‘ All Some None N/AINF21 Do you ensure the following suitability criteria are met, both at the outset prior to appointment of the AR and on a continuing basis: • both individual and organisational competence to conduct the required tasks; • financial solvency and soundness; • reputation (in terms of criminal and disciplinary background checks)? G: It is essential to ensure that in appointing ARs, TCF principles are taken into consideration so that customers can be assured of the same level of service as if dealing directly with you. The firm should conduct its own due diligence tests and not rely on any prior FSA approval for this and pre-joining visits to this effect are recommended. The firm should be satisfied that the T&C arrangements of the AR are at least equal to its own such that its personnel policies do not pose an unacceptable risk to your firm. Treating Customers Fairly Indicator   All Some None N/AINF22 Do you have a ‘multiple principal’ agreement in place with any ARs and IARs that work for other firms as well as your own making sure that responsibilities are clearly apportioned? G: Apart from this being a regulatory requirement, best practice dictates that roles, responsibilities and liability be clearly defined in respect of the management of any shared resource such as an Appointed Representative. In particular responsibility for dealing with complaints should be made clear so that customers are ensured fair and consistent treatment. Treating Customers Fairly Indicator ‘ Yes No N/AINF23 In respect of Introducer ARs (IARs), does the firm: • verify the identity of the firm/individual; • ensure their suitability to act for your firm (in terms of knowledge, ability, and good repute) and ensure that training is provided/undertaken if necessary to achieve and maintain the necessary competency; • establish a contract detailing the activities that the IAR is permitted to undertake; • ensure the activities of the IAR are restricted to those detailed in the contract; • if necessary, register the IAR with the FSA? NB: The N/A option may be selected if you do not employ Introducers. Treating Customers Fairly Indicator Ž All Some None N/A
  • 24. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireINF24 Do you have a documented supervision structure, procedures and work schedule in place for visiting and monitoring the performance of ARs and IARs? G: The firm is responsible for the acts and omissions of its (I)ARs and therefore their supervision should be controlled to the same extent as in-house resources. Those responsible for the supervision of (I)ARs must be sufficiently independent of them such that objectivity can be maintained and conflicts of interest avoided. Treating Customers Fairly Indicator Œ   ‘ Yes No N/A
  • 25. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnairePREVENTION OF FINANCIAL CRIMEPFC1 Have you appointed a member of your Management Team to have overall responsibility for dealing with the prevention of financial crime? G: Financial Crime includes insurance fraud, identity and credit card theft and money laundering. Various regulations apply including the Money Laundering Regulations 2007, Proceeds of Crime Act 2002 and the Prevention of Terrorism Act 2005. Treating Customers Fairly Indicator Œ Yes NoPFC2 Have you allocated adequate resources to support the Manager in this role? G: This might include a Deputy, other staff such as a Money Laundering Reporting Officer and a budget for training. Treating Customers Fairly Indicator Yes NoPFC3 Have you raised awareness about financial crime within the firm? G: Guidance should address recognition and reporting issues. Reporting systems should include the adoption of a whistle-blowing policy for use in appropriate circumstances. Treating Customers Fairly Indicator Œ Yes NoPFC4 Do you systematically review information from Government, regulatory, professional and or membership/trade bodies about financial crime and assess its implications for your firm? G: The nominated Manager or their delegate should monitor journals, press, websites and/or receive e-mail alerts from authorised bodies to keep informed of developments and compliance requirements. Policies, procedures and training should be kept up to date accordingly. Treating Customers Fairly Indicator Œ Yes NoPFC5 Do you conduct regular refresher training about financial crime? G: Refresher training should be conducted at least every two years or as events and updates dictate. Training for new staff should be provided as part of their induction process. Treating Customers Fairly Indicator Œ Yes NoPFC6 Has the firm identified and defined the specific types of financial crime its business is at risk of, and introduced controls to deal with suspicions of financial crime? G: In developing control measures, consideration needs to be given to the cost-benefit relationship between detection and prevention costs and actual losses. Guidance on insurance fraud can be obtained from the FSA website and on money Laundering from the Joint Money Laundering Steering Group (JMLSG). Treating Customers Fairly Indicator Œ Yes NoPFC7.1 Do you have processes in place for reporting and centrally recording concerns about financial crime: - i) within the firm? Treating Customers Fairly Indicator Yes NoPFC7.2 ii) externally to the relevant Authorities? G: Suspicions should be reported to SOCA (Serious and Organised Crime Agency) which has taken over this role from NCIS (National Criminal Intelligence Service). Treating Customers Fairly Indicator Yes NoPFC8 If any reports are made to external authorities such as SOCA, are reply times monitored to ensure delays and blocks on transactions are minimised? G: SOCA reply standards for money laundering reports of 7 and 31 days should be monitored to ensure that blocks on processing transactions are minimised. Treating Customers Fairly Indicator Yes No
  • 26. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnairePFC9 Do your independent file / customer record reviews take into account financial transactions / potential for financial crime? G: This could be incorporated into the review process referred to in RM1 and RM2 later in this questionnaire. Treating Customers Fairly Indicator Yes NoPFC10 Do you conduct a documented annual review of the effectiveness of systems for the prevention of financial crime? G: This could be conducted as part of the annual review of risk as a whole (see also RM11) later in this questionnaire. Treating Customers Fairly Indicator Œ Yes NoPFC11 Do you keep records of: • customer and transactional risk assessments; • due diligence applied in terms of know your customer (KYC) checks; • customers financial transactions; • customer insolvency; • any internal and external reports (as PFC7) made? G: Records should be kept for at least five years to comply with the Money Laundering Regulations but firms should assess for themselves the likelihood of problems arising after that period and retain records accordingly. Treating Customers Fairly Indicator All Some NonePFC12 Where appropriate, have you segregated responsibilities for front office and back office activities to reduce the risk of financial crime? G: The aim of this is to prevent any one individual from initiating, processing and controlling financial transactions as claims handling and payment, premium refunds etc. NB: The N/A option may only be selected if you are a sole operator. Treating Customers Fairly Indicator  Yes No N/APFC13 Are bank statements, receipts, counterfoils, petty cash records and supporting documents checked at least monthly against the cash book entries independently of the employees making cash book entries or paying into the bank? NB: The N/A option may only be selected if you are a sole operator. Treating Customers Fairly Indicator Yes No N/APFC14 Are responsibilities, procedures and specific authority limits defined for processing financial transactions? G: This would include for instance, payments in, cheque requisitions, electronic transfers, commitments to pay / purchase orders and contracts, and management of petty cash. NB: The N/A option may only be selected if you are a sole operator. Treating Customers Fairly Indicator Yes No N/APFC15 Is there an expenditure limit after which all cheques drawn require more than one signature? NB: The N/A option may only be selected if you are a sole operator. Treating Customers Fairly Indicator Yes No N/APFC16 Do you have established processes to deal with the retention and destruction of customer personal and financial data which include, as a appropriate: • shredding of hard and soft copy data in files, CDs and any media used by the firm; • vetting of third parties used for data destruction and disposal of your firms data; • wiping the hard drives of any computers that are sold, donated or disposed of; • specific direction on recording and keeping of financial data such as credit and debit card numbers? G: Specialist software should be used to wipe computer hard drives as standard instructions can easily be overcome by a determined hacker. Treating Customers Fairly Indicator  All Some None
  • 27. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnairePFC17 Do your vetting processes for service providers include consideration of financial crime and the protection of customer data and other assets, including: • appraising the staff recruitment and monitoring practices employed by the third party; • if appropriate, seeing first hand how data / assets will be handled, stored or disposed of; • contractual terms that include the need for your approval if subcontract firms are proposed; • ensuring data / other assets is not accessible if third parties are to work unsupervised? G: Such considerations must be made in respect of outsourced security, cleaning, IT, administration, recruitment, data storage and disposal services. Treating Customers Fairly Indicator Œ All Some None
  • 28. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSERVICE DELIVERY - ALL INTERMEDIARIESSDALL1 Do you have systems in place for categorising your customers in accordance with COBS and/or ICOBS and ensuring that the appropriate levels of protection are afforded according to their regulatory client status and/or your own perceptions of client risk? G: Review might be annually during contact for renewal or when collecting information regarding mid-term adjustments etc. Although different categories reflecting different risks and regulatory requirements might be applied, firms should assess for themselves the risks involved and apply risk management controls accordingly. For the firms own protection you may wish to apply the same levels of disclosure to a known difficult professional/commercial client as you would to a consumer/retail customer, or when status is uncertain or there is dual status. Treating Customers Fairly Indicator Œ Yes NoSDALL2 Have you conducted a review of the potential for conflicts of interest across all areas of your firm (or within your group) and established a written policy which addresses: • specifically what conflicts may arise and in which activities and services (of the firm or group); • the controls in place to manage such conflicts; • the decision-making structure and policies on maintaining independence or declinature if conflicts do arise; • disclosure processes to inform clients of conflicts that cannot be fully managed and obtain consent/s where appropriate; • staff training on how conflicts might impact on their areas of work and the processes to be followed to manage such risks? G: Such assessments should be reviewed and updated if necessary at least annually - perhaps as apart of an overall risk management review (see RM11). Conflicts addressed should be those arising between the firm (and any of its representatives) and a customer, or between one customer and another. Examples of the types of conflict to consider are detailed in SYSC 10.1.4 and corresponding controls expected, in SYSC 10.1.11. Treating Customers Fairly Indicator Œ All Some NoneSDALL3 Are all customer-facing documents independently checked by a competent individual to ensure that they are fair, clear and not misleading and comply with regulatory requirements in terms of disclosure and the use of prescribed language and logos? G: This includes both hard-copy documents and electronic communications and would typically include terms of business, price menus, key facts documents and cover correspondence such as e-mails and letterheads. The Unfair Contract Terms Act / Unfair Terms Regulation also set parameters in this context. Treating Customers Fairly Indicator Ž Yes NoSDALL4 If information is provided via a website, do you ensure that the website conditions required under regulation are fulfilled by ensuring that: • the information is appropriate to the context in which the business between the firm and the customer will be conducted; • the customer has specifically consented to the provision of that information in that form; • the customer has been notified electronically of the address of the website, and the place on the website where the information may be accessed; • the information is up to date; • the information is accessible continuously by means of that website for such period of time as the customer may reasonably need to inspect it? G: To ensure that the context is appropriate, there needs to be evidence that the customer has regular access to the internet, such as the provision by the customer of an e-mail address for the purposes of conducting the business in question. Firms should be aware of hackers attempting to alter data and in particular financial information so websites should be checked daily. NB: The N/A option may be selected if you do not operate a website or provide information to customers in this way. Treating Customers Fairly Indicator Ž  All Some None N/ASDALL5 Have you appointed a competent person with overall responsibility for designing and/or checking and sign-off of financial promotional materials / scripts prior to release to ensure compliance with relevant regulations and codes of conduct? G: Someone of the appropriate skill, knowledge and expertise must be engaged for this purpose - either within the firm or externally. Compliance experts may check documents but cannot sign-off on behalf of your firm but legal experts can. If dealt with internally, most firms only allow someone in a Controlled Function to undertake this role. Websites and sponsored links must also be included in financial promotions if they make any financial claims. Consideration of TCF principles must be made when designing new promotions. NB: The N/A option may only be selected if you do not undertake financial promotions. Treating Customers Fairly Indicator  Yes No N/A
  • 29. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDALL6 Do you keep a central record of all financial promotions such that you are able to demonstrate that: • a clear audit trail of production, review, revision (if necessary), approval, sign-off, and release was followed; • relevant personnel were trained and had achieved the necessary product / target group knowledge before releasing the promotion; • assessment of potential client detriment was undertaken and due prominence was given to resultant warnings and any risk factors; • the promotion was only targeted at those for whom it was intended; • a date for review or withdrawal was set and adhered to? G: A record of all financial promotions must be kept and this includes copies of all repeat advertisements. Regard for TCF issues should be borne in mind when developing, targeting and providing sales and marketing training to personnel. Records should be kept for an agreed period appropriate to the latency of potential problems. NB: The N/A option may only be selected if you do not undertake financial promotions. Treating Customers Fairly Indicator  All Some None N/ASDALL7 In the event of complaints about financial promotions from any stakeholders, do you have systems in place to: • immediately recall / withdraw promotional literature; • contact any respondents that may have been misled or adversely affected, if such promotions are found to be misleading; • consider other promotions, customers or business areas that could be affected and act to mitigate the risk of complaints and customer detriment in those areas; • demonstrate that subsequent promotions incorporate changes which eliminate the likelihood of the problems encountered previously? G: Information from any such exercises should be captured and monitored at management level as this will contribute towards TCF metrics and monitoring. NB: The N/A option may only be selected if you do not undertake financial promotions. Treating Customers Fairly Indicator  All Some None N/ASDALL8 If any form of form of distance marketing is undertaken do you ensure that: • limited disclosure information is given only if the recipient has given their express consent to receiving limited details; • provide full disclosure information immediately afterwards, should a contract be concluded as a result of the distance contact? G: limited disclosure information is that defined by the Distance Marketing Directive and explained in ICOBS 3.1, COBS 5.1 or MCOB 4.5. NB: The N/A option may only be selected if you do not undertake distance marketing. A useful assessment guide is provided in ICOBS 3 Annex 1G. Treating Customers Fairly Indicator Ž All Some None N/ASDALL9 If providing information by way of a website, do you ensure that the website conditions are fulfilled i.e.: • information about the firm is easily, directly and permanently accessible to its customers and potential customers; • any references to price is clear and unambiguous and shows whether additional charges such as taxes are included or excluded; • commercial communications comply with Article 6 of the E-Commerce Directive; • unsolicited communications sent by e-mail are clearly and unambiguously identified as such? G: All as defined by the E-Commerce Directive. Article 6 requires that such communications are clear and unambiguous in identifying the purpose of the communication, the person/firm on whose behalf the communication is made, and that promotional offers, competitions and games and qualifying / participating conditions are made clear. NB: The N/A option may only be selected if you do not operate a website or use yours to provide information in this manner. Treating Customers Fairly Indicator Ž All Some None N/ASDALL10 If an e-commerce order/instruction is received, unless the contract is concluded by e-mail or other individual communication, does your firm: • provide information about how the contract should be concluded, stored, and accessed; • provide a means by which the customer can identify and correct any errors prior to confirming the instructions; • advise the customer of any relevant codes of conduct to which the firm subscribes and how these can be referred to electronically; • provide contractual terms in a way such that the recipient can store and reproduce them; • promptly acknowledge receipt of the customer’s instructions by electronic means? G: All as defined by the E-Commerce Directive. NB: The N/A option may only be selected if you do not conduct e-commerce as indicated above. Treating Customers Fairly Indicator Ž All Some None N/A
  • 30. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDALL11 If contacting potential customers by telephone, do you ensure that cold calling is not employed unless permitted under regulation? G: Customer contact can only be made if there is already an established relationship and the customer has given their express consent to be contacted (warm-calling), or unless regulatory exemptions apply such as with lower-risk packaged products. Retail customers registered with the Telephone Preference Service (TPS) will also need to be identified to prevent phone calls to barred numbers. NB: The N/A option may only be selected if you do not conduct telesales activities. Treating Customers Fairly Indicator Œ Yes No N/ASDALL12 If the customer authorises continuation of the call, do you use scripts (or equivalent) that have been approved and signed-off by a competent person to ensure that all required disclosure information is given to the customer? NB: The N/A option may only be selected of you do not undertake telesales activities. Treating Customers Fairly Indicator Ž Yes No N/ASDALL13 Do you assess new customers in accordance with agreed risk assessment criteria to decide whether to accept their business or not? G: Such criteria might include commercial validity, your firms ability to meet the clients required service standards, and potential for furtherance of financial crime, conflicts of interest, impact on reputation, and ethical issues to arise. Treating Customers Fairly Indicator Yes NoSDALL14 Do you have clearly defined brokerage / fee charging policies for each group of clients you deal with? G: Charges and benefits should be transparent such that the customer cannot claim to have been unfairly treated. Treating Customers Fairly Indicator Œ Yes NoSDALL15 Do you have a consistent means of evidencing that customers are always advised they have a duty to disclose all circumstances material to the insurance / investments being discussed? G: This might be on an introductory phone message, web page, structured disclosure scripts and/or questioning techniques, and/or on key facts or other documentation. Your questioning should ensure that customers disclose all material information. You cannot rely on expecting a customer to know what is material and what is not. Treating Customers Fairly Indicator Ž Yes NoSDALL16 Do you keep a legible note of client discussions in a set format to ensure that records are structured, thorough and consistent? G: This should apply to face-to-face meetings or telephone conversations and may be recorded as a file note or computer record. Software programmes that automatically record date, time and identify the individual making the entry such that details cannot be tampered with are helpful in this regard. Otherwise a proforma note showing date, time, individuals involved, action required etc. should be used. Treating Customers Fairly Indicator Ž   Yes NoSDALL17 If the above relates to oral instructions, is a record made to show: • the date and time of instruction; • the name of the person providing the instructions; • if relevant, any options/variations selected; • any advice given in respect of the instructions; • what action (aside of normal processing), need be taken by the firm; • what further action (if any) the customer was advised to take? G: This originates from MiFID requirements. Telephone monitoring systems should be considered by way of back up to other records made in case of query or complaint. Firms required to (or electing to) operate under COBS rules are required to attempt such recording in any case. Treating Customers Fairly Indicator Ž  All Some NoneSDALL18 Should the customer instruct sale, purchase, conversion, cancellation, or suspension of premiums or contributions, do you ensure that the consequences and any disadvantages of such actions are confirmed in writing, indicating also as to whether the product still remains suitable to meet the customer’s needs? G: Checks on changed circumstances such as income, employment, residence, health, family circumstances, business changes etc. should be undertaken at the same time. A consistence record of such conversations should be kept on the file / record. Treating Customers Fairly Indicator Ž   ‘ Yes No
  • 31. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDALL19 To the extent that your firm provides a regular review of policies / investment products held by an individual customer and the continuing suitability of these, do you ensure that such reviews are diarised and undertaken in adequate time to allow customers to assess their options and make informed decisions? G: Product / service performance should be included in such review if promotions advised or implied that such a service would be undertaken. Evidence of such reviews, or at least offering the review if a client declines the service, should be kept. NB: The N/A option may be selected if you do not offer such a service. Treating Customers Fairly Indicator Ž   Yes No N/A
  • 32. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSERVICE DELIVERY - GENERAL INSURANCENB: This Section is not relevant if you do not perform any General Insurance (including pure protection products) work.SDGEN1 Do you always provide in advance of any contractual agreement, terms of business or other Initial Disclosure Document (IDD) that: • has been adapted from the FSA precedent IDD or combined IDD or based on the content therein*; • if using the precedent, is used in accordance with the FSA guidance notes that accompany these documents; • as appropriate, refers to other documents or legal texts so that a complete picture of the business terms can be established; • has been independently reviewed by a competent person to verify that the document is fair, clear and not misleading? G: The precedent IDD and combined IDD are shown in ICOBS 4 Annex 1G and COBS 6 Annex 2 respectively. Initial disclosure information may be given via a website provided that the website conditions are fulfilled (see SD-ALL9). *Unless the Distance Marketing Directive (DMD) applies in which case the limited disclosure details in ICOBS 3 may be used. Information should be provided at an appropriate stage in advance of the sales/advice process such that an informed decision can be made as to whether to proceed with the purchase. The competent person referred to may be an experienced member of your team or an external authority such as a compliance specialist or a Solicitor. Treating Customers Fairly Indicator Ž All Some NoneSDGEN2 In assessing your customer’s demands and needs, do you appraise and record: • facts disclosed as requested including the details of any existing cover / policies; • limit of cover requested and whether this is appropriate to that needed; • the need and relevance for any exclusions, excesses, limitations or conditions; • whether the insurance is a condition of the purchase of other goods and services; • as relevant to the type of cover, adequate information about personal and financial circumstances; • whether the costs involved are appropriate to the customers demands and needs; • whether the customer would be eligible to claim on each aspect of the proposed policy? G: Your questioning should ensure that customers disclose all material information. You cannot rely on expecting a customer to know what is material and what is not. When checking eligibility to claim, all aspects should be checked for example on a payment protection policy, illness and redundancy qualification criteria should both be checked. Treating Customers Fairly Indicator Œ   All Some NoneSDGEN3 Do you use a script, checklist, fact-find or other form of structured questioning technique to ensure the customers background (KYC - know your customer details) and demands and needs are appraised in a thorough and consistent manner? G: Both within the same office by different personnel, and across any branches. Free-form data gathering is unlikely to be as effective. Questioning may need to be investigative in approach to ensure a full picture is obtained and any conflicting detailed ironed out. Assumptions should not be made when conducting reviews of customer data so all details held should be verified as necessary. Treating Customers Fairly Indicator Ž  Yes NoSDGEN4 If your services include providing information about policies/products on a non-advised basis, do your scripts include specific statements and evidence to ensure that customers are made aware of their responsibility for deciding whether a policy meets their demands and needs? G: This includes explaining the main characteristics (significant benefits, exclusions, limitations and its price and duration), and providing information in writing immediately after a sale if the sale is conducted orally. NB: The N/A option may only be selected if you do not deal with non-advised sales. Treating Customers Fairly Indicator Ž Yes No N/ASDGEN5 Are the products offered to the client, reviewed for suitability and approved / signed prior to issue by someone who is competent and fully knowledgeable about the customers personal and financial circumstances and their demands and needs? Treating Customers Fairly Indicator Ž   Yes NoSDGEN6 Is evidence of the required level of research kept on the file / on record in a manner which provides traceability to the recommendation/s made? G: To demonstrate analysis of the market / market sector has been undertaken in line with initial disclosure commitments and the most suitable options have been identified. Treating Customers Fairly Indicator Yes No
  • 33. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDGEN7 Do you confirm in plain English how your recommendations meet the customer’s individual demands and needs? G: Either in a personalised suitability statement, or via standard product information (if suitable) for non-advised sales? Generic statements may be included in the firm’s product information (such as application forms or key features documents). Details should be modulated according to the complexity of the policy proposed and should be clear, accurate and comprehensible to the customer. Precedent letters may be useful as a means of achieving this but resultant client letters should be reviewed to ensure that only relevant information is included. Treating Customers Fairly Indicator Ž Yes NoSDGEN8 As relevant, do you provide the following information as part of your quotation for the proposed policy and any options: • the total cost including the premium to be paid; • fees, administrative charges and any taxes payable (either to the broker or the insurer); • itemised costs if other goods and/or services are associated with the policy; • whether purchase of the policy is a condition of purchase of other goods / services; • any costs that will be due for mid term changes or cancellation of the policy; • if the premium is reviewable, the period for which the quoted premium is valid and the timing of the review/s; • the total cost to be paid throughout the whole of the distribution chain; • if interest is payable on money borrowed to pay the premium, the amount borrowed and cost of borrowing it shown as a separate amount; • clear information on cumulative costs associated with policies paid using, or sold in connection with credit? G: If there is a possibility that taxation changes might impact upon future amounts payable, then this should be explained to the customer. Information on finance charges may be provided separately by the company providing the credit facility. Treating Customers Fairly Indicator Ž All Some NoneSDGEN9 Where your firm promotes itself as an independent broker, do you ensure that the customer is given the option to pay a fee for your service as your only remuneration? G: Commissions received by the firm need only be advised on request and the law of agency dictates that this must be provided. Such information should be disclosed in writing promptly and in cash terms (or the basis for calculation if that is not possible) so the firm must ensure that it has management information systems capable of capturing and reporting this information. Inducements of financial worth include payments related to profit sharing, sales volumes, and premium financing arrangements, and include cash, cash equivalents, commission, goods, hospitality or training programmes. Where a fee-only payment is agreed, commissions received should be reimbursed and customers should not be dissuaded from the fee-paying option. Treating Customers Fairly Indicator Œ Yes NoSDGEN10 If the customers demands and needs cannot be fully met by your usual product providers / product range, do you: • identify the mis-matches between the customers demands and needs and the products being offered; • make clear the implications and risks of accepting the recommendation made; • where appropriate, advise that other products which more closely match the customers requirements may be available through other brokers; • confirm the above in writing where the customer decides to proceed with your recommendations? G: Such mis-matches should be advised as early as possible in the advice/sales process so that an informed decision can be made as to proceed. Treating Customers Fairly Indicator Ž  All Some NoneSDGEN11 If a policy summary or key features document is provided by your firm, do you specifically draw your customer’s attention to:- i) the importance of reading the policy summary before the end of the cancellation period? G: This responsibility may lie with the insurer if issued direct but if so, firms should ensure that responsibilities between themselves and the insurer for providing and distributing pre- and post-contractual product information is understood and adhered to. Insurer cooperation and service standards should be monitored to this effect. The Regulatory Guide ‘The Responsibilities of Providers and Distributers for the Fair Treatment of Customers’ provides guidance on how these responsibilities should be managed. Anything issued by your firm should be appropriate, comprehensible, and provided ‘in good time’ before conclusion of the contract (or immediately after if proceeding to conclusion by telephone and the customer gives explicit consent to receiving the limited disclosure information). Treating Customers Fairly Indicator Ž Yes No
  • 34. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDGEN12 ii) the implication of any significant exclusions, excesses, limitations or conditions of the policy itself or in the operation of the contract/policy? G: Such exclusions and limitations might include eligibility to claim such as age, residence or employment status, limitations to the amount of cover, reviewable premiums, policy warranties, exclusion of certain conditions, diseases or pre-existing medical conditions, own-fault circumstances, excesses, deferred payment periods, moratorium periods, or periods for which benefits will be paid. Any such details should receive due prominence and not be hidden in the small print (or made clear in the conversation where information about the policy has been provided orally). Limitations regarding operation of the contract may for instance be that it is limited to internet or telephone communication. Treating Customers Fairly Indicator Ž Yes NoSDGEN13 Unless distance marketing applies, do you provide the following with the policy summary before concluding the contract: • information on the right to cancel the policy; • information on the claims process; • arrangements for handling complaints and the existence of a complaints body (the FOS); • the applicable law or legal system proposed by the firm in case of dispute; • the name, legal form and address of the head office or branch/agent of the insurer? G: The information should be appropriate, comprehensible, and provided ‘in good time’ before conclusion of the contract so that the customer can make an informed decision. Information on cancellation should include the existence or absence of cancellation rights, duration of the cooling off period, the conditions, practical instructions and cost implications for exercising this right, and the consequences of not exercising it. The FOS leaflet may be used to provide information about that facility. Treating Customers Fairly Indicator Ž All Some NoneSDGEN14 If your firm brokers group policies, having provided disclosure information, policy summary and/or policy documents to the group customer, do you advise in writing that each member of the group should be: • given a copy of the policy summary; • advised of any changes to previous schemes; • informed that a copy of the full policy document is available on request? Treating Customers Fairly Indicator Ž All Some NoneSDGEN15 If the firm makes a personal recommendation that an individual become part of an existing group scheme: • is an individual suitability assessment undertaken and a demands and needs statement prepared; • is the disclosure information and policy summary issued to the individual; • and, if they decide to proceed, is a full policy document provided? Treating Customers Fairly Indicator Ž  All Some NoneSDGEN16 To ensure and confirm that the customer is on risk do you: • provide written confirmation to the customer; • where binding authority exists record the inception date and time and confirm details with the insurer; • ensure that the relevant paperwork is produced and/or received and checked as being correct; • ensure the documents are issued to the customer; • collect and process payment or establish payment collection mandates and ensure that corresponding payments are made over to the insurer; • ensure that the customer correctly completes and returns the necessary documents, and record that each relevant stage has been completed? G: A checklist (hard copy and/or computerised) might be used for this purpose. If you operate under a binding agreement it may not be necessary to advise and pay the insurer in each individual circumstance, however notification and payment must take place in accordance with the terms of the agreement. Treating Customers Fairly Indicator  All Some NoneSDGEN17 Where you operate a binding authority and issue certificates on behalf of an insurer, do you have documented procedures that define: • the process to be followed when issuing such certificates; • those personnel with the authority to issue (and sign if appropriate) such certificates; • the level of competency required to be authorised to issue certificates? G: Any such arrangement should be reviewed at least annually to ensure that there are no conflicts of interest and TCF principles apply. Such a review might be part of an annual management review as detailed in RM11. NB: The N/A option may only be selected where no binding authority exists. Treating Customers Fairly Indicator Œ  All Some None N/A
  • 35. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDGEN18 Do your evidence of cover documents always include: • confirmation of the insurer with whom cover has been placed and the necessary IMD disclosure details; • fully agreed terms and conditions; • the policy summary and full policy document/s; • a statement of price; • the process to follow and information to be provided in the event of a claim; • information about cancellation rights; • information about any applicable compensation scheme (extent and level of cover and how to obtain further information)? G: Fully agreed terms and conditions must be clearly defined and agreed in writing by the insurer for contract certainty purposes. Terms such as "to be agreed" should only be used up until policy inception. Evidence of cover documents include policy documents, schedules of cover or renewal notices with any relevant endorsement wordings. Exclusions and limitations such as eligibility, limitations on cover, reviewable premiums and own-fault circumstances should receive due prominence and not be hidden in the small print. NB: The N/A option may only be selected where issue of these documents is the responsibility of the insurer. Treating Customers Fairly Indicator Ž All Some None N/ASDGEN19 Are evidence of cover documents delivered in a durable medium to the insured in accordance with the following standards: • retail customers (consumers): despatched within 5 working days from the date of inception or renewal; • commercial customers: received within 30 elapsed days from date of inception or renewal? G: These delivery standards reflect those required in the Contract Certainty Code of Good Practice. NB: The N/A option may only be selected where issue of these documents is the responsibility of the insurer. Treating Customers Fairly Indicator  All Some None N/ASDGEN20 If errors are identified in the cover documents, are procedures in place to ensure that the following standards for correction are achieved: • notification of errors to the insurer by yourselves or the insured within 14 elapsed days of receipt of documents; • issue of corrected documentation by the insurer or yourselves within 14 elapsed days of notification of the error/s? G: As dictated by the Contract Certainty Code of Practice. Where responsibility lies solely between the insurer and the insured, your processes/documentation should nevertheless highlight these standards for your customers. NB: The N/A option may only be selected where issue of these documents is the responsibility of the insurer. Treating Customers Fairly Indicator Ž  All Some None N/ASDGEN21 If authorised to accept cancellation rights on behalf of the insurer, does your firm: • return any sums due to the customer within 30 days of cancellation; • ensure payment required from the customer in respect of cancelled contracts does not reflect any more than the value of the services supplied prior to cancellation such that it cannot be construed as a penalty for cancellation of the policy; • ensure any attached contracts are also cancelled unless the customer instructs otherwise? G: Equally, your firm may expect any sums due from the customer within 30 days and a simple contractual off-set can be used where appropriate. Guidance on cancellation charges is given in ICOBS 7.2. NB: The N/A option may be selected if cancellation is only handled by the insurer. Treating Customers Fairly Indicator ‘ All Some None N/ASDGEN22 Are any mid-term changes instructed by the customer: • recorded fully in terms of date, time, and details of the changes required; • confirmed in writing to the customer with any resultant premium amendments and/or fees due; • advised and recorded with the insurer? G: In line with TCF culture, customers should not face unreasonable post-sale barriers if they wish to change details, products, or providers. Treating Customers Fairly Indicator ‘ All Some NoneSDGEN23 Do you ensure that for the duration of the contract, the customer is informed of any change in: • the premium (if allowed in the contract terms); • terms or conditions of the policy, ensuring that the implications of any change are explained fully and clearly with emphasis on any changes to the benefits and significant or unusual exclusions arising; • the law applicable to the contract; • the insurer, their legal form and/or the address of its head office (or any agency or branch responsible for concluding the original policy)? Treating Customers Fairly Indicator Ž All Some None
  • 36. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDGEN24 If any mid-term changes can be imposed by the insurer, do you communicate such changes immediately once informed and where possible, prior to the change taking effect so that the customer has the option to investigate alternatives if required? G: The potential for mid-term adjustments enforceable by the insurer must be made clear at inception. TCF principles require that any such powers receive due prominence in disclosure information, and are compatible with the original policy such that variations would not be considered unfair under the Unfair Terms Regulations. NB: The N/A option may only be selected if the policies you deal with do not have potential for imposed mid-term adjustments. Treating Customers Fairly Indicator Ž Yes No N/ASDGEN25 In the case of protection contracts, if there is any change to the policy and/or the law applicable to the contract, is the customer also reminded of: • the contract term; • means of terminating the contract; • means of premium payment and duration of payments; • the definition of all benefits and options; • information on premiums for each benefit? NB: The N/A option may only be selected if you do not broker protection contracts. Treating Customers Fairly Indicator Ž All Some None N/ASDGEN26 Do you have an effective diary / reminder system in place to ensure that customers are issued with renewal proposals in good time such that customers have adequate opportunity to consider their options and compare quotes? G: The previous requirement under ICOB 5.3.18R to take reasonable steps to provide renewal terms to retail customers within 21 days of policy expiry has been removed under principles-based regulation, however for risk management purposes, it is recommended that the firm establishes processes to issue renewals in accordance with its own targets and measures these as part of its TCF metrics. A longer period of renewal notification would allow customers more time to assess options and may be better in TCF terms. Treating Customers Fairly Indicator  Yes NoSDGEN27 Do you have a process in place to ensure that renewal documents are checked for suitability and authorised for issue by a competent person? Treating Customers Fairly Indicator Ž  Yes NoSDGEN28 Do you ensure that written or verbal authorisation is received from the customer prior to renewing any policy? G: This may include confirmation by way of payment, or the customer being required to take no action where the renewal notice clearly states this as an option. Treating Customers Fairly Indicator Œ Yes NoSDGEN29 Does your renewal documentation contain: • details of any changes to the terms of the expiring policy and an explanation of such changes; • any changes regarding the status or identity of the insurer; • any changes to status information about the firm; • new policy documentation (or advice that the customer may request a new policy); • a statement of costs; • information about cancellation? G: Particular care should be taken to point out any changes in exclusions, limitations, excesses or conditions of the policy. Treating Customers Fairly Indicator Ž All Some NoneSDGEN30 Do you keep full details regarding the following for an appropriate period following the renewal date: • customers that advise that they do not wish to renew; • insurers that advise that they do not wish to invite renewal; • the reasons for the firm deciding that it no longer wishes to act for a customer? G: Details should include at least: client name, policy type and provider (discontinued and replaced), and reasons for the change including premiums. Firms should decide for themselves what is appropriate. SYSC now only requires firms to keep records for "as long as is relevant for the purposes for which they are made" but prior to principle-based regulation, these records should have been kept for at least 12 months. Treating Customers Fairly Indicator Œ Ž  All Some None
  • 37. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDGEN31 Do you handle claims on behalf of the customer? G: Regardless of whether you have authority to settle claims, if you have any involvement in assisting clients in handling claims, this question should be answered Yes. Questions SDGEN32-33 are N/A if you answer "No" to this question. Treating Customers Fairly Indicator Yes NoSDGEN32 When acting for a customer in relation to a claim, does your claims handling process include controls to: • identify and resolve any conflict of interest in respect of the claim; • ensure that acknowledgements are sent promptly (i.e. within 5 working days); • provide a claim form or other means of response and guidance to help the policyholder to make a claim; • provide information on how and by whom the claim will be handled; • keep the claimant informed about the progress of their claim; • enable you to accept or reject claims in accordance with agreed criteria and notify the customer of the outcome and any settlement you propose or reason for rejection; • enable concerns regarding fraud to be escalated and dealt with in accordance with specified procedures; • operate a diary system to ensure progress stages are actioned promptly so that claims can be settled as swiftly as possible; • ensure that, where claims representatives are used, controls are in place for their appointment and management; • keep records of claims, communications with customers, and settlement details for an agreed period after the settlement of each claim? G: It would be more appropriate to consider whether there is potential for conflict of interest in any claims settlement agreement overall rather than for individual claims. Such a considerations should be included in an annual review of risk (see RM11) or when any new claims settlement agreement is proposed. Treating Customers Fairly Indicator Œ Ž  ‘ All Some NoneSDGEN33 Are records of claims paid, claims rejected and claims-related complaints kept in a format that enables effective analysis and RMAR reporting? G: It is helpful to analyse claims so that common occurrences and prevention measures can be advised to customers in an attempt to reduce insurance claims and claims rejected. Such analyses might be undertaken by yourselves and/or the insurers. Claims rejected and claims related complaints should be analysed in assessing the performance of the firm and its providers in achieving your TCF objectives. NB: The N/A option may be selected if you have no claims handling authority but please note the guidance on information gathering and review. Treating Customers Fairly Indicator Œ  Yes No N/A
  • 38. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSERVICE DELIVERY - FINANCIAL ADVISERSNB: This Section is not relevant if you do not perform any Life, Pensions & Investments (including long-term care products) work.SDADV1 Do you have processes in place which ensure that: • clients are advised of the client category they have been allocated, any options permitted, and the implications of these; • records of classification along with supporting information about clients leading to their categories is kept; • records of notifications sent are also retained? G: Existing private and intermediate customers may be grandfathered to their equivalent MiFID categories (retail and professional respectively) without the need for notification to be sent. Firms may still choose to categorise all clients as retail so one standard of protection applies but firms must advise their clients accordingly. Clients should not feel pressured to opt-up to professional status and a corresponding lower level of protection. COBS 3.8.2(3) details record retention periods for different types of business although the firm should assess for itself whether records should be retained for longer in terms of risk management generally. Treating Customers Fairly Indicator Œ All Some NoneSDADV2 Do you operate a clear policy and supporting procedures on client re-categorisation that enables you to: • risk assess requests for change in a consistent manner against defined criteria; • advise promptly whether requested changes are permissible or not; • discuss and agree whether the requested change is appropriate or not; • advise any changes in writing explaining the implications of the change clearly and accurately? G: The expertise, experience and knowledge of the individual/entity as well as the nature of the transactions / services planned should be taken into account when conducting this risk assessment (COBS 3.5.3 gives further details of qualitative and quantitative assessments). Copies of any non-standard notification should be kept in line with regulatory requirements. NB: The N/A option may only be selected if your firm does not permit client category changes. Treating Customers Fairly Indicator Œ Ž All Some None N/ASDADV3 Do you always provide in advance of any contractual agreement, terms of business or other Services and Costs Disclosure Document (SCDD) that: • has been adapted from the FSA precedent SCDD or combined IDD or based on the content therein*; • if using the precedent, is used in accordance with the FSA guidance notes that accompany these documents; • as appropriate, refers to other documents or legal texts so that a complete picture of the business terms can be established; • has been independently reviewed by a competent person to verify that the document is fair, clear and not misleading? G: The precedent SCDD and CIDD are given in COBS 6 Annex 1 and Annex 2 respectively. Services and costs disclosure information may be provided via a website provided that the website conditions are fulfilled. *Unless the Distance Marketing Directive (DMD) applies in which case the limited disclosure details may be used. Information should be provided at an appropriate stage in advance of the sales /advice process such that an informed decision about investment decisions can be made. The competent person may be an experienced person in your firm or an external body such as a compliance specialist or Solicitor. Treating Customers Fairly Indicator Ž All Some NoneSDADV4 Do your terms of business also include, as necessary: • further details of the scope and limitations of your services in support of any standardised wording used in the SCDD; • the essential rights and obligations of the firm and its clients; • a summary of the firm’s conflict of interest policy including how fair treatment is to be ensured should any conflict materialise, and that further details of this policy may be requested at any time; • whether or not any client assets will be held by your firm and if so, the associated risks, and the arrangements and safeguards in place for the protection of such assets; • any choice of languages in which the client may communicate with the firm and receive documents and other information; • advice on the process to be followed should any of the terms and conditions require amendment; • methods of communication that may be used including those for sending / receiving instructions; • the basis on which any investments will be managed, making clear the nature of the risks involved, and giving the necessary risk warnings prior to the conclusion of any agreement? G: Initial disclosure information may be provided via a website provided that the website conditions are fulfilled. Firms should always assess whether their precedent/standard information is adequate and appropriate to individual circumstances and provide further information as necessary. A balance must be struck between providing information that is concise, adequate but not overwhelming. Treating Customers Fairly Indicator Ž All Some None
  • 39. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDADV5 Do you provide clients with a schedule of charges in a advance of an advice being given, explaining: • the services to which the charges relate; • the payment options available and an explanation of each of these; • transparent commission / inducements that will become due to your firm showing typical amounts payable? G: This could be in the form of the SCDD for the various products and services your firm provides and may be based on the FSA precedent provided in COBS 6 Annex 1 but this format is not compulsory. Charges schedules may also be provided via a website provided that the website conditions are fulfilled. Firms promoting themselves as independent must give clients the opportunity to pay via a fee only if they wish. Treating Customers Fairly Indicator Ž All Some NoneSDADV6 Do you keep records showing a clear audit trail of how inducement values quoted to clients are arrived at? G: Records will need to demonstrate how commission values were arrived it. Commission also includes commission equivalents such as fees and non-monetary benefits which might include training, literature etc. If the exact value is difficult to assess, then the method of calculating it should be disclosed in a comprehensive, accurate and understandable way. Treating Customers Fairly Indicator Œ Ž Yes NoSDADV7 Do you re-advise the client of the firm’s commission or remuneration with each annual statement and also when a policy change is made? Treating Customers Fairly Indicator Ž Yes NoSDADV8 In assessing your client’s demands and needs, do you appraise and record: • the clients objectives, expectations, demands and needs and priorities; • appropriate personal and financial details including debt, tax status, and benefits entitlements; • facts disclosed and requested including any existing cover and investments; • type of cover / investments requested (and whether this is appropriate to that needed, and if not an explanation of why); • whether the costs involved are proportionate to the clients demands and needs; • whether the costs are affordable in both the short and long-term; • as appropriate, whether the client would be eligible to claim on any proposed cover; • as appropriate, the clients risk appetite and their understanding of the risks involved; • whether any related investment risk is consistent with the objectives determined? G: Extensive guidance on assessing the clients background and understanding of risk based on knowledge, experience and transactional activity is provided in COBS 9.2 and 9.3. Treating Customers Fairly Indicator  All Some NoneSDADV9 Do you use a script, checklist, fact-find or other form of structured questioning technique to ensure the clients background and attitude to risk (KYC - know your customer details) and demands and needs are appraised in a thorough and consistent manner? G: Both within the same office by different personnel, and across any branches. Free-form data gathering is unlikely to be as effective. Client reviews should ensure that data held is still accurate without making assumptions. Treating Customers Fairly Indicator  Yes NoSDADV10 Do all advisers follow a consistent method of assessing and recording the clients attitude to risk and adhering to the firms policy on the sale of any products designated as high risk? G: Terms such as high, medium and low in respect of attitude to risk, or any numerical scales used for assessing risk appetite should be defined so that all advisers understand and consistently apply such assessments and categorisation can also be clearly explained to clients such that a common understanding of the terms is attained. Having a formal policy on the sale of high risk products should also help in preventing the sale of unsuitable products to vulnerable clients. Treating Customers Fairly Indicator Œ  Yes NoSDADV11 Having completed the suitability assessment, do you assess whether adequate personal and financial information about your client is known and if not, advise them accordingly and adhere to a strict policy of not making any product recommendations? G: Although it may be possible to provide a non-advised service - to arrange a deal or deal as agent, in which case, written instructions to this effect should be obtained and kept on file. Treating Customers Fairly Indicator Ž  Yes No
  • 40. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDADV12 Do you have a clear policy on the research process and the minimum number of products and/or providers to be compared to ensure that a fair comparison of the market is undertaken prior to making your recommendation/s? NB: The N/A option may only be selected if you are a tied broker. Treating Customers Fairly Indicator  Yes No N/ASDADV13 Is evidence of the required level of research kept on the file / on record in a manner which provides traceability to the recommendation/s made? G: To demonstrate analysis of the market / market sector has been undertaken in line with initial disclosure commitments and the most suitable products have been identified. Treating Customers Fairly Indicator   Yes NoSDADV14 Do you provide in plain English a personalised, well-balanced, suitability letter or statement detailing clearly and concisely: • your understanding of the clients personal and financial background including existing cover and investments, tax-status, benefit entitlements and affordability issues; • your understanding of the clients objectives, demands and needs, expectations and priorities; • the level of advice being provided ensuring this matches initial disclosure commitments, and where this is focused advice, a warning of the risks and implications of this; • your understanding of the clients attitude to risk based on a common understanding of terms used; • whether a personal recommendation is being made and, where this is the case; • how and why the recommendations made are considered suitable for the client; • relevant risk warnings regarding recommendations made; • any objectives not met and why; • for any products asked for by the client that are not considered suitable, the reasons why? G: Visits by the FSA are constantly finding that a standardised approach and statements are being used too often and are inappropriate in many circumstances. It is therefore essential to review all suitability statements and tailor them personally to individual clients demands and needs. The content should be modulated according to the complexity of the demands and needs and resultant product/policy. Only relevant information should be included so content originating from multi-purpose precedents needs to be carefully scrutinised and irrelevant information removed. Treating Customers Fairly Indicator Ž   All Some NoneSDADV15 Are the products offered to the client, reviewed for suitability and approved / signed prior to issue by someone who is competent, authorised and fully knowledgeable about the clients personal and financial circumstances, appetite for risk and their demands and needs? Treating Customers Fairly Indicator Ž  Yes NoSDADV16 Are reasonable steps taken to make sure the client understands the assumptions and any comparison made, the advice given, nature of the products involved, and any associated risks? Treating Customers Fairly Indicator Ž  Yes NoSDADV17 Are controls in place to assess the appropriateness of products sold through the non-advised route, to ensure that: • the client’s knowledge and experience is adequately assessed using defined criteria prior to providing this service; • warnings are given if it is thought that the product or services requested are not appropriate for the client based on the above assessment, or, insufficient information has been provided to allow the firm to determine whether the product/service is appropriate; • a policy is in place for deciding whether to proceed with the transaction if any warnings are given; • any conflicts are interests are identified, assessed, and managed effectively in line with the firm’s defined policy? G: Transactions that may be excluded from such assessments are detailed in COBS 10.4 - 10.6. This process need not be undertaken each time, only at the beginning of the relationship or new service provision. A standardised format may be used to give warnings of inappropriateness. Referral to a senior member of staff including written details of the assessment should be given in difficult circumstances to manage risk. Records relating to the assessment of appropriateness should be retained for a minimum of five years. NB: The N/A option may be selected if your firm is not involved in non-advised sales. Treating Customers Fairly Indicator  All Some None N/A
  • 41. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDADV18 If the firm has chosen to follow the basic advice rules relating to stakeholder products, are processes in place and training undertaken to ensure that: • only pre-scripted questions are used for the advice and sales process; • the client understands the basic advice and the basis on which it was provided; • advice, products, and transactions that are not permitted under the regulatory system are prevented; • assessment of clients answers to scripted questions are undertaken and only suitable stakeholder products recommended; • the nature of the products recommended, their aims, commitments and risks are adequately explained to enable the client to make an informed decision; • summary information is given prior to conclusion of the contract, explaining the reasons for the recommendation; • clients are advised that any complaints arising that lead to FOS involvement, will take into account the limitations of the basic advice process; • completed scripts are given to clients as soon as reasonably practical after conclusion of the sale, and copies retained for a minimum of five years? G: The basis on which advice is provided needs to include the clients background information, attitude to risk, and should set out clearly the amount(s) to be paid into the recommended product(s). COBS 9 Annex 1G provides guidance on the sales process for stakeholder products to ensure adequate client understanding and suitability assessment. NB: The N/A option may be selected if you do not deal with stakeholder products. Treating Customers Fairly Indicator Ž  All Some None N/ASDADV19 Additionally, in respect of pension transfers and opt-outs, does the suitability statement include: • assumptions made to undertake the assessment; • the likely benefits and options of the ceding and proposed scheme; • a clear and adequate detailed comparison (with supporting analyses where relevant); • advice on whether to proceed with the proposed change or not; • a summary of the advantages and disadvantages of the recommendation? G: Reasonable assumptions include all of the client’s relevant circumstances and numerous financial assumptions regarding inflation, retail price index, interest rates, the client’s attitude to risk, benefit commencement times etc. NB: The N/A option may only be selected if you do not provide advice or broker products in this area. Treating Customers Fairly Indicator Ž  All Some None N/ASDADV20 Are suitability assessments for pensions transfers and opt-outs conducted or checked by a pension transfer specialist? G: Transfers from defined benefits such as final salary schemes to defined contributions only and also pensions involving protected rights are higher risk products and so must be handled by a pensions transfer specialist. NB: The N/A option may only be selected if you do not provide advice or broker products in this area. Treating Customers Fairly Indicator  Yes No N/ASDADV21 Do you decline to act unless documented acceptance of your terms and any risk warnings are obtained? Treating Customers Fairly Indicator Œ Yes NoSDADV22 If the clients demands and needs cannot be fully met by your usual product providers / product range, do you: • advise the client accordingly, detailing the gaps in the demands and needs that cannot be met; • ensure that no personal recommendation is given and that the client understands this is the case; • where appropriate, advise that other products which more closely match the clients requirements may be available in the market; • provide contact details for other firms who may be better placed to advise on the products needed? G: When giving information about other products that may be more suitable, care should be taken that only information is given and no personal recommendation is made as there is a heightened risk of mis-selling in such situations. In signposting clients to other brokers, firms should make clear that no personal recommendation is being given and that the ultimate choice rests with the individual. Treating Customers Fairly Indicator Ž  All Some None
  • 42. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDADV23 Unless distance marketing applies, does your firm provide (or ensure the following is issued by the provider) before concluding the contract: • a key features document showing prominently the providers brand and ’keyfacts’ logo for each product; • information on cooling off and cancellation (its existence or otherwise, the process, duration and conditions); • the complaints process to follow in the event of dissatisfaction; • details of compensation cover that might be available via the FSCS if the provider cannot meet its liabilities; • all Consolidated Life Directive (CLD) required disclosure information about the provider and the commitment involved? G: The information should be appropriate, comprehensible, and provided ‘in good time’ before conclusion of the contract so that the client can make an informed decision and should be of at least the same standard as any promotional literature about the product. Information may be provided via a website as long as the website conditions (see SD-ALL9) are fulfilled. Treating Customers Fairly Indicator Ž All Some NoneSDADV24 Whether the key features summary is provided by your firm or direct by the provider, do you specifically draw your client’s attention to the importance of reading the policy summary before the end of any cooling off period? G: Firms should ensure that responsibilities between themselves and the provider for providing and distributing pre- and post-contractual product information is understood and adhered to. Provider cooperation and service standards should be monitored to this effect. The Regulatory Guide entitled ‘The Responsibilities of Providers and Distributers for the Fair Treatment of Customers’ provides guidance on how these responsibilities should be managed. Anything issued by your firm should be appropriate, comprehensible and provided ‘in good time’ before conclusion of the contract (or immediately after if proceeding to conclusion by telephone and the client gives explicit consent to receiving the limited disclosure information). Treating Customers Fairly Indicator Ž Yes NoSDADV25 Whether the key features summary is provided by your firm or direct by the provider, do you ensure the client is alerted to, and understands the following as appropriate to the policies / products concerned: • the nature and complexity of the product and how it works; • the benefits and risks of buying or investing in the specific product(s) outlined; • any significant limitations, minimum standards, or unusual exclusions and the implications of these; • details of the risks of each particular investment concerned; • whether a public prospectus is available and where this may be accessed? G: Such exclusions and limitations should receive due prominence and not be hidden in the small print (or made clear in the conversation where information about the policy has been provided orally). Treating Customers Fairly Indicator Ž All Some NoneSDADV26 If errors are identified in the policy documents, are procedures in place to ensure that the following standards for correction are achieved: • notification of errors to the insurer by yourselves or the insured within 14 elapsed days of receipt of documents; • issue of corrected documentation by the insurer or yourselves within 14 elapsed days of notification of the error/s? G: Where responsibility lies solely between the insurer and the insured, your processes/documentation should nevertheless highlight these standards for your clients. NB: The N/A option may be selected if your terms require clients to deal direct with product providers in respect of such document errors. Treating Customers Fairly Indicator  All Some None N/ASDADV27 Are any changes made by the client as a result of periodic review: • recorded fully in terms of date, time, and details of the changes required; • confirmed in writing to the client with any resultant contribution / premium amendments and/or fees due; • advised to the provider? G: Firms might have different policies for dealing with such changes depending on the return for the firm but in line with TCF culture, clients should not face unreasonable post-sale barriers if they wish to change (as appropriate) details, products, or providers and so policy in this area should be reviewed as part of the firms TCF objectives. NB: The N/A option may be selected if no ongoing commitment to the client is in place and you would expect such changes to be notified direct to the provider by the client. Treating Customers Fairly Indicator  ‘ All Some None N/A
  • 43. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDADV28 If any mid-term changes can be imposed by the insurer, do you communicate such changes immediately once informed and where possible, prior to the change taking effect so that the client has the option to investigate alternatives if required? G: The potential for mid-term adjustments enforceable by the insurer must be made clear at inception. TCF principles require that any such powers receive due prominence in disclosure information, and are compatible with the original policy such that variations would not be considered unfair under the Unfair Terms Regulations. NB: The N/A option may only be selected if the policies you deal with do not have potential for imposed mid-term adjustments. Treating Customers Fairly Indicator Ž  Yes No N/APORTFOLIO MANAGEMENT & EXECUTION ONLYNB: This Section is not relevant if you do not perform any Portfolio / Wealth Management work.SDADV29 Does your disclosure information about investment products, strategies and execution venues include: • the types of investments that may be included in the client’s portfolio; • the types of transactions and any limits; • details of any delegations of discretionary management for any or all of the specified investments, the risk in such discretion and any constraints; • appropriate guidance on, and warnings of, the risks associated with investments and various strategies adopted; • the nature, frequency and timing of any reports to be provided on investment service performance; • agreed objectives and evaluation methods and/or benchmark(s) that will be used for monitoring the firms performance? G: Provision of a simplified prospectus may enable the firm to meet its compliance obligations in this respect. Treating Customers Fairly Indicator Ž All Some NoneSDADV30 Do you adhere to documented policies and procedures to ensure that a consistent approach is achieved as to how: • instructions are recorded, orders allocated and executed fairly and in due turn (relative to both other client orders and the trading interest of the firm); • orders are executed as soon as is reasonably practical (unless postponement is in the best interest of the client); • the best possible result is obtained for the client having due regard for financial instruments involved and the best execution factors; • the client is promptly notified of transactions effected on their behalf in accordance with agreed standards? G: COBS 11.2 provides details and guidance in respect of ‘best execution’ and the criteria to be applied. Specifically, COBS 11.2.15 – 11.2.18 describes the factors to take into account when establishing an order execution policy - for most retail clients this is likely to be price and the cost of execution. Rules relating to portfolio managers, receivers and transmitters are defined in COBS 11.2.32 (2). Treating Customers Fairly Indicator Ž  All Some NoneSDADV31 Do you provide clients with information about your execution policies in good time, prior to the provision of services to explain: • the importance assigned to each of the execution criteria/factors or the process used to determine that importance; • the execution venues used by the firm; • a warning that specific instructions may override the firms policy to prevent it acting to obtain the best possible result; • whether the execution policy provides for the possibility of executing client orders outside a regulated market or MTF and if so, express written consent from the client will be needed to permit this prior to instructions being acted upon? G: Policy details may be issued or made available via a website provided that the website conditions (see SD-ALL9) are fulfilled. Treating Customers Fairly Indicator Ž All Some NoneSDADV32 Are arrangements in place to monitor and review the effectiveness of the execution policy in achieving the best possible result for your clients, and to identify and correct any deficiencies? G: A review should be undertaken at least annually but in any case, should an event impact upon the policy objectives. Any resultant material changes to the policy should be notified to relevant clients. Treating Customers Fairly Indicator  Yes NoSDADV33 Do you have a policy to inform clients immediately if there appears to be any difficulty in executing their instructions or achieving any specific objectives set? Treating Customers Fairly Indicator Ž Yes NoSDADV34 Do you have a written policy that is consistently followed in respect of order aggregation and allocation? G: Client orders and own account transactions should only be aggregated if such an approach does not work to the disadvantage of any of the clients concerned, unless clients have been advised previously of the firm’s policy on aggregation and that this may work on some occasions to the individual disadvantage. Yes No
  • 44. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance Questionnaire Treating Customers Fairly Indicator Œ  Yes NoSDADV35 Are own account transactions and records readily identifiable and are there controls in place to ensure that management of such accounts does not conflict with those of the firm’s clients? G: As per standards dictated by the Market Conduct Rules. NB: The N/A option may be selected if you do not deal on your own account. Treating Customers Fairly Indicator Œ Yes No N/ASDADV36 Are polices on personal account dealing established and controls in place to ensure the firms rules are strictly adhered to? NB: The N/A option may be selected if you do not permit personal account dealing within your firm. Treating Customers Fairly Indicator Œ Yes No N/ASDADV37 Do you have a written policy on ‘churning and switching’ that is consistently applied? G: To ensure that the firm does not deal or arrange to deal, or switch between or within a product (either directly or via recommendation to the client), or enter into rebrokerage transactions with unnecessary frequency (‘churning’), unless such transactions are in the best interests of the client in achieving their stated investment objectives. Treating Customers Fairly Indicator Œ  Yes NoSDADV38 Do you have a written policy on client asset realisation to ensure that: • assets are not realised unless the firm is legally entitled to do so; • the client has accepted the firms terms of business which describe the action it may take to realise assets, the circumstances in which it may do so, and over which assets it may exercise this right; • notice of at least three working days is given to the client before asset realisation takes place; • all reasonable steps are taken to ensure that funds received are promptly and correctly deposited to the clients account? Treating Customers Fairly Indicator Ž  All Some NoneSDADV39 Do you keep appropriate records of the execution process so that your firm is able to demonstrate, if requested, that orders have been executed in accordance with the firm’s best execution policy? G: Records of client orders and decisions to deal should be kept for at least 3 years and should fulfil the criteria detailed in COBS 11.5. Treating Customers Fairly Indicator  Yes NoSDADV40 Are transactions made on behalf of the client promptly notified to the client (or their agent), detailing all essential information about the transaction, including where applicable, associated costs? G: The essential information is detailed in COBS 16 Annex 1R although this may be varied according to the transaction type. If requested, the status of the order should also be advised so arrangements for tracking progress should be in place such that this information can be readily given on request. NB: The N/A option may be selected if responsibility for notification lies with another party. Treating Customers Fairly Indicator Ž Yes No N/ASDADV41 Do you establish with the client any predetermined threshold above which any losses or potential losses must be notified and are controls in place to ensure that any such circumstances are promptly advised? Treating Customers Fairly Indicator Ž  Yes NoSDADV42 Do you establish the appropriate reporting frequency with each client (and where appropriate transaction type), and operate effective diary controls to ensure that statements and reports are issued as agreed? G: Commonly this will be six-monthly (or monthly where portfolio leverage has been authorised), unless the client has opted for quarterly reports or annual reports supported by transactional reporting. If the client states that reports are not required, or it has been determined that reports from another source will suffice, then evidence of this should be retained. Clients must be advised at disclosure of the various reporting options available to them. Portfolio leverage is a high risk approach that should be reserved for professional investors. COBS 16 Annex 1R and Annex 2R can be used to establish precedent reports to ensure compliance, consistency and thoroughness. Treating Customers Fairly Indicator Ž  Yes No
  • 45. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDADV43 Where investments or assets held on behalf of clients, is an annual statement of the value and composition of those assets provided showing: • details of all investments and/or assets held; • any unsettled transactions (based consistently on either the date traded or the settlement due date); • the extent to which those assets have been used for financing transactions; • details of any benefits accrued due to those transactions; • the basis on which such benefits have been accrued? G: Some exemptions are permitted under the regulatory system but best practice would be to provide such statements in any case. NB: The N/A option may be selected if you do not hold client money or other assets. Treating Customers Fairly Indicator Ž  All Some None N/A
  • 46. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSERVICE DELIVERY - MORTGAGE BROKERSNB: This Section is not relevant if you do not perform any Home purchase / reversion products work.SDMOR1 Do you always provide in advance of any contractual agreement, terms of business or other Initial Disclosure Document (IDD) that: • has been adapted from the FSA precedent IDD or combined IDD or based on the content therein*; • if using the precedent, is used in accordance with the FSA guidance notes that accompany these documents; • as appropriate, refers to other documents or legal texts so that a complete picture of the business terms can be established; • has been independently reviewed by a competent person to verify that the document is fair, clear and not misleading? G: The precedent IDDs for various mortgage types are on the Mortgage Disclosure pages of the FSAs website. The precedent CIDD is given in COBS 6 Annex 2 but may not be used in some circumstances - MCOB 4.4.1(4) refers. Initial disclosure information may be provided via a website provided that the website conditions are fulfilled. *Unless the Distance Marketing Directive (DMD) applies in which case the limited disclosure details may be used. Information should be provided at an appropriate stage in advance of the sales/advice process such that an informed decision about the service provider can be made. The competent person may be an experienced person in your firm or an external body such as a compliance specialist or Solicitor. Treating Customers Fairly Indicator Ž All Some NoneSDMOR2 Does initial disclosure information include clear information on what level of advice is being provided and how much the advice will cost (or how much the firm will be remunerated)? G: Remuneration must be expressed in cash terms that the customer will be able to understand. Treating Customers Fairly Indicator Ž Yes NoSDMOR3 Does your customer risk awareness information include warnings on both falling income and increasing interest rates? Treating Customers Fairly Indicator Ž Yes NoSDMOR4 Do you ensure that where mortgage applicants live at different addresses, information is sent or advised to both (or all) addresses? Treating Customers Fairly Indicator Ž Yes NoSDMOR5 Is your research for the suitability assessment retained to evidence (as a minimum) consideration of the customer’s: • personal and financial circumstances; • product and payment preferences; • eligibility; • whether they are able to afford the product (both now and in the future); • in relation to mortgage switches, consideration of existing products and penalties; • and why, specifically, the proposed product is suitable for the customer? Treating Customers Fairly Indicator  All Some NoneSDMOR6 If you broker specialised mortgage products (e.g. low start, shared appreciation or Islamic mortgages etc.), do you have standard product information tailored to these products? NB: The N/A option may only be selected if such products are not part of your services. Treating Customers Fairly Indicator Ž Yes No N/ASDMOR7 If you promote your firm as being independent, do you ensure that there is an option to pay a fee for the brokerage service as your only means of remuneration, and if this payment option is chosen, do you repay any commission received to the customer? G: If a combination of packaged products, mortgage contracts and home reversion plans may be provided and independence is restricted to certain areas as limited providers are used in others, this should be made clear on the disclosure document. NB: The N/A option may only be selected if your product choice is from a single provider or limited choice of providers. Treating Customers Fairly Indicator Œ Yes No N/ASDMOR8 Where services are offered on the basis of a restricted scope / market, do you have systems in place to monitor whether mortgages obtained from a restricted number of lenders, that business is actually placed with those lenders? NB: The N/A option may only be selected if you offer whole market choice.
  • 47. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance Questionnaire Treating Customers Fairly Indicator Œ Yes No N/A
  • 48. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDMOR9 If no product from the firm’s range is suitable for the customer, do you have an express policy that no recommendation is to be given? G: Making recommendations from outside an individuals knowledge base may result in mis-selling. Treating Customers Fairly Indicator Œ  Yes NoSDMOR10 Do you provide illustrations prior to the customer submitting an application and make clear the limitations of any illustrations given? G: Illustrations for original mortgages, further advances, rate switches and party additions or removals must comply with FSA requirements defined in MCOB 5. Treating Customers Fairly Indicator Ž Yes NoSDMOR11 Is evidence of the required level of research kept on the file / on record in a manner which provides traceability to the illustration/s given? G: To demonstrate analysis of the market / market sector has been undertaken in line with initial disclosure commitments and the most suitable mortgage products have been identified. Treating Customers Fairly Indicator Œ  Yes NoSDMOR12 Are you able to assure your customers that Illustration information relating to charges for the: • initial monthly payment; • subsequent monthly payment; • total amount payable and overall APR, will vary by no more than 1% from the mortgage offer? Treating Customers Fairly Indicator Ž All Some NoneSDMOR13 Do you keep a copy of all illustrations given for at least one year where the customer makes a mortgage application as a result of the illustration? Treating Customers Fairly Indicator Yes NoSDMOR14 If the customer requests or agrees to any change such as a rate switch, further advance or party additional / removal, is information explaining the change and its impact, provided in good time prior to the change taking effect? Treating Customers Fairly Indicator Ž Yes NoSDMOR15 Where mortgages are taken out to consolidate existing debt, does the firm advise on: • the costs associated with extending the repayment period; • whether it may be appropriate to secure a previously unsecured loan; • whether further advice may be available form Citizens Advice or credit counselling services; • whether negotiations with creditors are more appropriate than taking out / extending an existing mortgage? G: The credit status of applicants should also be investigated if it is likely that sub-prime mortgages are the only option. Treating Customers Fairly Indicator Ž  All Some NoneSDMOR16 Is it policy to recommend the least expensive mortgage having taking the following factors and priorities into account: • eligibility criteria such as loan to value ratio; • product type most suitable (interest only, repayment or combination); • repayment term preferred; • stability of payments and impact of increasing interest rates; • initial discount period; • early repayment intentions and potential exit charges; • other features e.g. payment holidays? Treating Customers Fairly Indicator  All Some None
  • 49. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireSDMOR17 If mortgages are brokered on a non-advised basis: • are questions scripted in advance; • are staff trained in the use of those scripts; • do staff understand the difference between providing information only and providing advice; • are staff adequately supervised to ensure that they give only information and do not extend into giving advice or making personal recommendations; • are scripts retained for at least 12 months from the date they were superseded? G: Such scripts must be prepared by a competent person authorised by the firm. Competency for this purpose is explained in the TC Sourcebook Annex 1. Sign-off may be by an authorised person or firm. Treating Customers Fairly Indicator Ž  All Some NoneSDMOR18 If you are required to calculate APRs, is there a person in your firm who has overall responsibility for ensuring that information on APR and its calculation is kept up to date? NB: The N/A option may only be selected if you are not required to calculate APRs. Treating Customers Fairly Indicator Ž Yes No N/ASDMOR19 If you provide mortgages that are assessed as being for business purposes, do you ensure that all procedures are tailored throughout for the provision of business information as follows: • initial disclosure, advising and selling standards; • pre-application, offer stage and post-sale disclosure; • charges; • arrears and repossessions? G: Firms should ensure that in altering the degree of disclosure and protection for business clients, they are not exposing the firm to greater risk and if such an assessment is made to the contrary, then risk control should be implemented accordingly. NB: The N/A option may only be selected if you do not deal with business mortgages / loans. Treating Customers Fairly Indicator Ž   ‘ All Some None N/ASDMOR20 Do you have a policy to provide information regarding your commission where a business customer specifically requests this? G: Hence, such information should be readily available to advisers and sales personnel either as set amounts or as a basis by which sums can be easily calculated. Treating Customers Fairly Indicator Ž Yes NoLIFETIME MORTGAGESSDMOR21 Prior to recommending products, do you ensure that the benefits of the LTM outweigh the customer’s entitlement (if any) to state benefits and the customer’s tax position (e.g. the loss of an Age Allowance)? G: Some specialist software programmes are available to assist with such assessments. Also issue of the FSA factsheet Raising money from your home should be considered as a means of raising awareness of key issues customers should consider before taking out an LTM. NB: The N/A option may only be selected if your firms product range excludes lifetime mortgages and similar products. Treating Customers Fairly Indicator  Yes No N/ASDMOR22 In addition to affordability, needs and suitability (as required for other mortgages) does the firm also consider: • other methods of raising funds (e.g. a Home Reversion Scheme or a Local Authority grant); • future options that may be closed-off if such a scheme is adopted? G: The latter should take into account state benefits that may be affected. NB: The N/A option may only be selected if your firms product range excludes lifetime mortgages and similar products. Treating Customers Fairly Indicator  All Some None N/ASDMOR23 Are referral systems in place, to refer customers to sources of help such as the Pensions Service, Inland Revenue, CAB, or Local Authority, that may be able to assist the customer further? NB: The N/A option may only be selected if your firms product range excludes lifetime mortgages and similar products.
  • 50. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance Questionnaire Treating Customers Fairly Indicator Œ Ž  Yes No N/ASDMOR24 Does your assessment of affordability include an assessment of the customer’s income and expenditure, any other resources available, any likely changes to income, extra costs payable once any initial discount period comes to an end? NB: The N/A option may only be selected if your firms product range excludes lifetime mortgages and similar products. Treating Customers Fairly Indicator  Yes No N/ASDMOR25 Do you have a written policy (that is consistently followed) in respect of recommendations rejected by the customer and action to be taken in such circumstances? NB: The N/A option may only be selected if your firms product range excludes lifetime mortgages and similar products. Treating Customers Fairly Indicator Yes No N/ASDMOR26 If non-advised sales are made in respect of LTMs or home reversion schemes, do scripted questions include (in addition to those set out in SD-MOR15) whether the following have been considered: • alternative means of raising funds; • whether the customers tax position will be affected; • future options that might be closed off if such a scheme is adopted; • the customers health and life expectancy; • the customers preferences for his/her estate; • other future plans and needs? NB: The N/A option may only be selected if your firms product range excludes lifetime mortgages and similar products. Treating Customers Fairly Indicator Ž  All Some None N/ASDMOR27 Have your disclosure and communication documents been tailored to suit LTMs / Home Reversion Schemes? G: IDDs and suitability letters specifically tailored towards this type of product will assist in ensuring letters are clear, concise, and only contain relevant information. NB: The N/A option may only be selected if your firms product range excludes lifetime mortgages and similar products. Treating Customers Fairly Indicator Ž Yes No N/ASDMOR28 In addition to the 1% tolerance allowable on illustration documents (see SD-MOR12), for LTMs, do you also ensure that the illustrated APR is no more than 0.1% below that which might eventually be payable and advise the amount by which the regular payment would increase following a 1% increase in interests rates? NB: The N/A option may only be selected if your firms product range excludes lifetime mortgages and similar products. Treating Customers Fairly Indicator Ž Yes No N/ASDMOR29 Have you checked and ensured that your product literature for LTMs comply with MCOB 9 requirements in terms of content, order and format? NB: The N/A option may only be selected if your firms product range excludes lifetime mortgages and similar products. Treating Customers Fairly Indicator Ž Yes No N/A
  • 51. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireCLIENT CARECC1 Are all partners, employees and representatives of the firm aware of and covered by the complaints procedure? G: Complaints procedures must include complaints against Appointed Representatives or other operational partners of the Firm. Particular care should be taken with ARs operating under more than one principal. Treating Customers Fairly Indicator ‘ Yes NoCC2 Are your complaints processes and contact points notified to all customers in writing at the outset? G: Publicised material need only be a summary whereby the availability of such a process and the contact details are made known, however a more detailed (but concise) description is made readily available if the customer wishes to, or appears to have cause to, complain. The full description should be issued if requested or when acknowledging complaints and should include details of how complaints will be handled and by whom, target timescales and information about the FOS. The FOS notice should be displayed in any case at all offices where the general public might visit. Treating Customers Fairly Indicator ‘ Yes NoCC3 Do you allow complaints to be received in person, in writing, orally, by e-mail or other reasonable means from customers, their representatives, policyholders and other stakeholders such as third parties / outsourced firms? G: This broadens the scope of a complaint so that opportunities for improvement are maximised. Customers includes potential customers from the point of contact even if no sale is made. Compensation claims and claims-related complaints should always be included in the firms overall complaints procedure. Treating Customers Fairly Indicator ‘ Yes NoCC4 Have you appointed someone of sufficient independence and authority to conduct an objective investigation and decide what action ought to be taken in response to any complaint received? G: That individual should be reasonably available to customers should they wish to discuss matters and should ensure that all matters are investigated competently, diligently and impartially. Treating Customers Fairly Indicator ‘ Yes NoCC5 Do you record centrally all complaints received (whether considered justified or not on receipt)? Treating Customers Fairly Indicator ‘ Yes NoCC6 Do you promptly forward complaints to other parties thought to be partially or wholly responsible and progress matters accordingly and keep records of such communications? G: Where this is the case, the customer should be advised of the fact and kept informed of progress with the other party. A careful audit trail of communications and decisions involving the third party should be kept. Treating Customers Fairly Indicator ‘ Yes NoCC7 Do you categorise all complaints received to enable full analysis of the causes and sources of complaints? G: This should be by type and product group at least for RMAR reporting although further breakdown by branch, department, individual, value, cost etc. will also be useful for trends analysis and risk management. Treating Customers Fairly Indicator ‘ Yes NoCC8 Does your firm operate a diary / reminder system to ensure that acknowledgements, holding replies (if needed), and final letters are issued for all complaints and that matters are resolved or otherwise concluded as promptly as possible? G: Timescales should be in line with set policies and/or as mandated by the regulator. Treating Customers Fairly Indicator ‘ Yes NoCC9 Do your personnel keep customers informed of progress on their complaint and the measures proposed to resolve it? G: Customers might also have added confidence in the firm if the wider measures taken to prevent reoccurrence are also explained. Treating Customers Fairly Indicator ‘ Yes No
  • 52. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireCC10 If matters cannot be resolved, do you advise eligible customers of other points of redress taking care to highlight any time limitations that may apply for seeking such redress? G: Such as having recourse to the FOS if the matter cannot be resolved (at all, or within the eight week timescale mandated by the FSA). Treating Customers Fairly Indicator ‘ Yes NoCC11 Do your complaints handling processes ensure that you systematically consider: • the root cause of each complaint and implement controls to prevent recurrence; • other business areas, products, literature that may be affected and take steps to prevent occurrence of similar problems elsewhere in the firm; • other customers that may be affected and seek to notify them of the potential detriment? G: In considering other aspects that may be affected, due consideration must be given to the conflict of interest that is obvious in such situations. If a customer notification exercise is to be undertaken, you should also consider the use of independent specialists to investigate and keep your PI insurers informed of developments. Treating Customers Fairly Indicator ‘ All Some NoneCC12 Where relevant, does your response literature remind customers of any compensation scheme(s) available taking care to highlight any time limitations that may apply if seeking such compensation? G: For example recourse to the FSCS. Treating Customers Fairly Indicator ‘ Yes NoCC13 Are arrangements in place to ensure complaints records and all related correspondence are retained for an agreed period in a manner which makes them readily retrievable? G: Complaints relating to MiFID business must be kept for 5 years so it may be easier just to retain all records for at least 5 years after conclusion if your work is subject to MiFID. Treating Customers Fairly Indicator ‘ Yes NoCC14 Are complaints analysed quarterly or six-monthly (depending upon the size of your firm) to detect any developing or recurring trends? G: Apart from root case analysis as a means of identifying key risk areas, other analyses such as FOS referrals and decisions, timeliness of complaint handling, overall volumes, the cost of complaints, and any customer feedback on the complaint process will assist in achieving TCF goals, better risk management and overall commercial success. Treating Customers Fairly Indicator ‘ Yes NoCC15 When making reference to the FOS in any notices, general literature or complaints correspondence, do you always include details of time limits that may apply when seeking redress through this channel? Treating Customers Fairly Indicator ‘ Yes NoCC16 Do your complaints records include: • the name of the complainant; • details of the complaint; • categorisation of cause and source in accordance with the firms definitions; • correspondence between the parties; • final outcome and resolution time, and as appropriate: • remedial action taken; • redress offered (including any monetary considerations); • corrective action measures needed to prevent reoccurrence; • potential for other areas, products, documents and/or customers to be affected and whether a notification exercise is necessary; • learning opportunities at individual, team, departmental, or firm-wide level to manage the risk of similar events? G: A structured Complaint Form is useful in this respect in order to standardise records made, ensure thoroughness and consistency of approach, and to follow-up and record the effectiveness of recommended actions. The firms complaint categories may reflect those defined by the FSA for RMAR reporting but other codes relating to source will help further for risk management purposes. Treating Customers Fairly Indicator ‘ All Some None
  • 53. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireCC17 Are details of complaints still kept even if resolved by close of business following the day of receipt? G: Although complaints resolved by the close of the following business day are exempt from regulatory reporting, in the context of holistic risk management, all expressions of dissatisfaction should be logged and analysed to maximise opportunities for improvement. Records may be shorter than those required by CC3 but corrective and preventive action measures may still be applicable and may contribute to overall trends. Some queries initially presented as complaints may be able to be resolved quickly, but these should still be captured for monitoring as they may be indicative of poor explanation earlier in the process or poor documentation. Treating Customers Fairly Indicator ‘ Yes NoCC18 Are complaints monitored frequently to ensure they are resolved as swiftly as possible? G: Apart from the nominated individual with overall responsibility for complaints, complaints monitoring should be an item on the management teams core agenda such that complaints issues are afforded high level attention where necessary. Treating Customers Fairly Indicator ‘ Yes NoCC19 Are regular reports made to management advising of any complaints issues, trends and recommendations? G: This should be the overall responsibility of the manager with responsibility for complaints although tasks such as record keeping and analyses may still be delegated. The management team may also need to authorise payment of any FOS awards so that these can be paid promptly. NB: The N/A option may be selected if you are a sole operator. Treating Customers Fairly Indicator ‘ Yes No N/ACC20 Are compensatory offers made to customers reviewed at management level to ensure that a consistent approach is adopted and all offers are full and fair? G: A central record of all offers made will assist in this regard. Treating Customers Fairly Indicator ‘ Yes No
  • 54. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireRISK MANAGEMENTRM1 Do you monitor quality / service standards through a variety of means including: • inspection of customer files; • inspection of computer based records / transactions; • telephone monitoring; • other means as appropriate to your operations? G: Other means might include mystery shopping, surveys of both internal and external perceptions, or audits of your processes and policies (see also RM9 and RM10). It should be noted that although customer satisfaction is a factor which contributes to your TCF monitoring, it cannot be taken in isolation to infer TCF policies and procedures are being upheld, as customers will not always know whether they have been treated fairly even if satisfied with the service provided. Firms to which COBS applies are required to take reasonable steps to record relevant telephone conversations, and keep a copy of relevant electronic communications of its employees and contractors in the course of key activities described in COBS 11.8 (some exceptions may be applied). Treating Customers Fairly Indicator Œ All Some NoneRM2 Do you use a detailed checklist / pro-forma for file / transaction inspections to ensure that: • all key risk aspects are addressed thoroughly and consistently; • remedial, corrective and preventive action is considered in all cases and where appropriate agreed and recorded; • action and follow-up is conducted within an agreed timescale? G: Remedial action might apply to the individual matter and to past business written in some cases. File inspections / reviews should be conducted by one or more competent persons who are independent of the work undertaken - possibly a peer or supervisor. Focus should not be solely on the completeness of the file - reviews should take into account the quality of research and advice provided and the clarity of communications. Treating Customers Fairly Indicator All Some NoneRM3 Do you specify the number or percentage, types, and frequency of file / transaction inspections to be undertaken for each person? G: For example new recruits should be subject to a higher quantity and frequency of checking than more experienced members of staff. The types of files reviewed should ensure that the full scope of products/services and/or client groups is addressed in a given period but frequencies may be risk-based according to the perceived risk of the product / transaction type. Treating Customers Fairly Indicator Yes NoRM4 Are trainees and new employees subject to 100% file / transaction inspection for a specified period? G: This may be reduced after an agreed trial period (e.g. 3 months, 6 months etc.), the length of which should be risk-based according to assessment of current competency. NB: The N/A option may be selected if you are a sole operator with no immediate plans for recruitment. Treating Customers Fairly Indicator Yes No N/ARM5 Do you systematically seek feedback from your customers with the aim of evaluating their perceptions of the service provided and improving customer service? G: This could be via regular annual reviews with larger or regular customers or short surveys by post with smaller or more transient ones. Satisfaction cannot be relied upon as a sole indicator to demonstrate customers have been treated fairly and some effort into assessing customers understanding of the products bought and their suitability should be included in such feedback exercises. The FSA have provided a sample feedback form on their website (refer to the toolkit sections). Treating Customers Fairly Indicator Œ Yes NoRM6.1 Do you have a system in place to record and review: - i) provider service standards; G: To ensure that this matches the firms own high standards and is as customers have been led to expect. Treating Customers Fairly Indicator  Yes NoRM6.2 ii) product performance; G: To ensure this matches the performance customers were originally led to expect. Treating Customers Fairly Indicator Œ  Yes No
  • 55. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireRM6.3 iii) regulatory rule breaches; G: Some of which may be reportable to the FSA under your regulatory obligations. A rule breach log should be kept in any case. Treating Customers Fairly Indicator Œ Yes NoRM6.4 iv) failures in the firms service delivery / service standards; G: This applies even where no complaint arises as a result. Treating Customers Fairly Indicator Œ Yes NoRM6.5 v) failures in meeting TCF aims; G: As defined by your firms defined objectives and targets in this regard. These will in any case overlap considerably with RM6.1-RM6.4. Treating Customers Fairly Indicator Œ Yes NoRM6.6 vi) the root cause of the failure and steps taken to prevent reoccurrence; G: It is essential that consideration is given to other people/areas in the business who might also benefit from the corrective action measures agreed upon. Effective risk management requires an open learning culture so that everyone can benefit from experiences gained elsewhere in the organisation. Treating Customers Fairly Indicator Œ Yes NoRM6.7 vii) the effectiveness of action taken? G: Follow-up is essential to close the corrective action loop but only once the measures implemented have proven to be successful. A standard form / means of reporting any opportunity for improvement would assist in this respect and ensure that a structured approach to corrective action and its subsequent monitoring is in place. Treating Customers Fairly Indicator Œ Yes NoRM7 Are the findings in RM6.1-RM6.7 reported on regularly to management meetings? G: This will enable trends to be identified and any further corrective action measures to be agreed on and monitored. Sole operators should include such considerations in whatever review system they have in place (as described in OS4). Treating Customers Fairly Indicator Œ Yes NoRM8 Does your firm systematically monitor decisions by the courts, FSA, FOS, OFT and other relevant authoritative bodies such that lessons from other firms mistakes and misdemeanours can be learned and preventive measures applied within your own firm accordingly? G: Shared responsibility for this research may be appropriate but all sources of risk should be addressed. IFAct newsletters might be used for this purpose. Treating Customers Fairly Indicator Œ Yes NoRM9 Do you conduct compliance checks in a systematic way to ensure that aspects of your business which are subject to regulation comply in all aspects to FSA rules? G: This process may be conducted in-house or by compliance consultants but in either case should be conducted in accordance with a risk- based monitoring plan. Treating Customers Fairly Indicator Œ Yes NoRM10 Do you conduct audits of other aspects of your management system in accordance with a risk-based work plan to identify any other problems and areas for improvement? G: This may be an audit conducted by your own personnel, outside consultants or a third party assessment organisation. SYSC 6.1 requires firms to monitor the adequacy and effectiveness of its measures and procedures to detect and minimise any risk of compliance failures. In line with the holistic QA approach of this questionnaire, this should apply to all risks and not just compliance requirements. Treating Customers Fairly Indicator Œ Yes No
  • 56. FINANCIAL SERVICES INTERMEDIARIESProfessional Indemnity Insurance - Quality Assurance QuestionnaireRM11 Do you analyse information regarding: • professional indemnity insurance claims and notifications; • complaints from customers and other stakeholders; • claims rejected and claims-related complaints; • other customer feedback; • potential for conflicts of interest; • service standards; • policy cancellations; • insurance / mortgage / investment product failure; • TCF performance indicators (both within the firm and externally at other stages of the product life-cycle); • regulatory rule breaches; • security and safety breaches; • financial crime issues; • compliance reviews and management system audits; • feedback from the regulator as a result of RMAR reports, document reviews, visits, and virtual visits; • general business / market risk management information; • supplier / partner relations and performance, financial standing, terminations/suspensions of any ARs or other risk assessment of outsourcing; • achievement of service standards/quality objectives? G: The systematic review of information and guidance from external sources such as government, regulatory, professional, training, and membership/trade bodies should feature regularly in management meetings as a means of remaining up to date with related developments in the business arena. Treating Customers Fairly Indicator Œ All Some NoneRM12 Do you review the findings of the analyses in RM11 at least annually, and at management level, to identify further opportunities for continual improvement? G: It is essential that management information is recorded centrally to enable this analysis to take place and that core agendas for management include these items for review. Treating Customers Fairly Indicator Œ Yes NoRM13 Are relevant parties kept regularly appraised of the firms goals and achievements in regard of the above analyses and reviews? G: Sole operators and small firms with no employees may still consider promoting such information to business stakeholders such as banks and insurers to keep them appraised of business risk. Treating Customers Fairly Indicator Œ Yes NoQUESTIONNAIRE COMPLETEYou have now completed the entire questionnaire and by doing so have undertaken a comprehensive risk review for your firm. Please return thequestionnaire to us by post or alternatively send a scanned version to qaforms@uk.qbe.com for our analysis. We will provide you with a report on yourbusiness which includes: l a comprehensive checklist containing details of the questions asked, your responses, and our analysis of your questionnaire results; l a TCF summary showing how each requirement in the questionnaire relates to the 6 TCF outcomes.Thank you for taking the time to complete our comprehensive Quality Assurance Questionnaire.