Chapter 7 - Conduct and culture Flashcards
What is conduct?
The way brokers carry out their business, in every interaction they have with their clients and insurers
Open, honest, transparent
What FCA principles state good conduct?
Principle 5 - market conduct
Principle 6 - interact with and respect their customers’ interests
What is CII’s Code of Ethics?
Doing what is right, not just what is required
Applies to all its members - impose penalties for failure to comply
Supplemented by a Financially Inclusive Customer Outcomes companion guide
What is ‘trust capital’?
Commodity which must be earned
What are examples of ways in which brokers can demonstrate good conduct when dealing with clients?
Provision of service excellence;
High quality of advice and experience;
Transparency of earnings;
Good quality literature and documentation;
Efficient handling of complaints; and
Avoidance of errors and omissions (E&Os)
What is trust a result of?
Good conduct
Broker meets or exceeds client expectations
How can brokers achieve service excellence?
Always completing what has been agreed by the deadline;
Returning client calls and messages promptly;
Ensuring good communication at all times, in the manner that the client wishes to
communicate;
Knowing your client;
Ensuring procedures are in place to reduce mistakes (such as a ‘second pair of eyes’
check); and
Contributing to a client culture where the client’s needs come first
Why do brokers disclose their earnings?
Transparency
Generate client trust
Why is the quality of literature and documentation important?
Docs issued without errors - claim, quality of service if produced by broker or insurer
Why is efficient complaint handling important?
Increase the level of trust or decrease it depending on the client’s expectations of what they think the outcome of complaint should be
What will reduce the risk of E&Os?
Service excellence and good procedures and practices, including suitable experience and
training
When would a broker need to display good conduct to an insurer?
Management of an insurer’s money - within timescales
What is corporate culture?
Shared values, attitudes, standards and beliefs that characterise members of an organisation and define its nature
What are examples of different cultures?
Sales culture - growth
Client first culture - service
Innovation - think outside of standards e.g., IT org
Green culture - impact of environment ‘carbon footprint’
What are strategic objectives?
Set by the senior management team at board level and tend to be long-term goals
Known and understood by everyone in the company
Purpose for every activity at all levels
What are companies more likely to have with strong corporate culture?
Clear strategic goals - staff and resources to achieve
Effective comms to communicate strategy
Adapt processes and procedures, monitor activity
Set clear targets and goals related to strategic goal
Reward success relating to strategic goal
Why is culture important?
Influences the way that a firm deals with its clients and insurers and also the way it is perceived by the public
How does the FCA expect the fair treatment of customers to be part of a firm’s culture and
day-to-day operations?
Establishment of a ‘robust and auditable procedure for handling complaints’
What is the definition of a complaint?
any oral or written expression of dissatisfaction, whether justified or not, from, or on behalf of, a person about the provision of, or failure to provide, a financial service or a redress determination, which alleges that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience
What are all eligible complaints subject to?
FCA complaints-handling rules and eligible complainants have a right of access to the Financial Ombudsman Service (FOS)
What must firms have in place and operate for non-eligible complaints?
Appropriate procedures for registering and responding to the expression of dissatisfaction
What is redress determination?
A written communication from a respondent under a consumer redress scheme which
sets out the results of the respondent’s determination under the scheme;
encloses a copy of the Financial Ombudsman Service’s standard explanatory leaflet;
and
informs the complainant that if he is dissatisfied, he may now make a complaint to the
Financial Ombudsman Service and must do so within six months
What does the FCA require all brokers to do for complaints?
Have formal procedure for dealing with complaints
Inform clients of this procedure and how to complain to the FOS - TOBA
Manage complaints as per procedure and document in firm’s compliance manual
What does a complaint give a broker the opportunity to do?
Remedy complaint to retain business
Identify problems within organisation to improve
What are the steps in a typical complaints procedure?
Step 1 - identification - is there a complaint?
Step 2 - report and record
Step 3 - Investigate and respond within timescales and decide who should be responsible
Step 4 - Resolution in an appropriate, timely, fair way by an independent person
Step 5 - FOS involvement?
Step 6 - Make improvements
What is the FOS?
Financial Ombudsman Service (FOS)
Free, independent and impartial service that
deals with unresolved disputes.
Membership is compulsory for all authorised firms, including intermediaries.
Where are the full rules and guidance for handling complaints and FOS operation held?
FCA Handbook in the Dispute Resolution: Complaints (DISP) Sourcebook.
What type of entites are eligible to complain to the FOS?
Consumer;
Micro-enterprise with fewer than ten employees and a turnover or balance sheet total of no more than €2m*;
Charities with an annual income of less than £6.5m;
Trustees of trusts with a net asset value of less than £5m;
Small businesses with an annual turnover of less than £6.5m and fewer than 50
employees or a balance sheet total of less than £5m; or
Guarantors.
Does the FOS become embroiled in legal proceedings?
No - must withdraw any legal proceedings prior to complaint to FOS
How early can you refer a complaint to the FOS?
6 months after final decision from company
6 years after the event complained about; or
3 years after the complainant knew, or should have known, that they had cause for complaint
What happens if a complaint has passed the timeframes?
Time-barred - can object against unless exceptional circumstances
What are the two ways a complaint can be awarded by the FOS?
Money award - After April 2019 and referred after April 2024 = “430k. Else £195k
Directions award - telling the firm what actions it needs to take to put things right for its customer e.g., paying claim, apologise
What happens if someone rejects FOS resolution? What if they don’t respond?
Can take to court
Acts as rejection
Who is the FOS funded by?
General levy paid by all firms; and
Case fee payable by the firm to which the complaint relates
How long do firms have to retain files following a complaint by the FCA?
3 years
How do E&O claims occur?
Broker has made a mistake that has caused their client to suffer a loss.
Why would a client have an uninsured loss when they thought the loss was insured?
Policy wording does not say what the client thought; or
Policy does not do what the broker said it would do
Where is the importance of a slip highlighted?
ICOBS 6, where the FCA specifically refers to
the provision of product information
How can E&O claims be prevented?
Effective risk management, quality procedures, file audits, good management
What are the 3 key principles to reduce the likelihood of an E&O claim?
RFT - right first time
Always ask
Put it in writing
What are the 4 fundamental rules for brokers when dealing with an E&O claim?
- Follow set procedures stringently.
- Do not conceal a problem
- Be honest and open about the situation.
- Engage professional indemnity insurers at the earliest opportunity and work with them in resolving the problem
What is miselling a product?
Not enough information is provided, or incorrect advice is given, either deliberately or negligently, for a product not in line
with a client’s demands or needs
Is mis-selling is a key issue for the FCA and has the recent PPI scandal has featured
prominently in the news?
Yes
Does a complaint have to be in writing as per FCA definition?
No
