FSA review prompts five firms to surrender permissions

A regulatory review of the sale and rent market that has found “serious failings”in the way products were marketed and sold to clients has resulted in five firms giving up their permissions to carry on regulated business and several others launching past business reviews.

Publishing finalised guidance off the back of a review of the sector today (31 July), the Financial Services Authority said it has temporary halted activity in the sale and rent back market as it has uncovered widespread poor practice among firms involved.

The regulator said that as a result of its probe, five firms active in this market have voluntarily varied their permissions and a number of other firms have also agreed to complete past business reviews, which may lead to further action being taken.

The FSA added that one firm has already been referred to enforcement over its conduct, but it refused to disclose the name of the company.

The actions follow a thematic review launched by the regulator in March 2011 of the SRB market. Around 22 authorised SRB firms were reviewed, of which nine were deemed to have been active in the SRB market since its full regulatory regime began in June 2010.

The other 13 firms are regarded as inactive, as they have not been involved in any SRB transactions under the full regime.

The review identified widespread poor practice among SRB firms, with the FSA concluding that the majority of SRB sales were either unaffordable or inappropriate.

The FSA said that appropriateness and affordability were not assessed correctly, disclosure was insufficient and was not given at the right time, record keeping was inadequate, agreements contained incorrect information and and financial promotions were not compliant with FSA rules.

In addition, the FSA said that sales processes did not follow the structure set out in the rules, or allow firms to gather enough information from the customer to assess appropriateness. Training and competence and compliance monitoring were also found to be inadequate in most cases.

The regulator said this means consumers have entered into agreements that have either already led to a detrimental outcome, or are highly likely to in the future.

The FSA said “This is unacceptable, and we are taking immediate action to address this. We took immediate action in order to address these failings and we continue to monitor activity in the market. We will take action where necessary in order to protect vulnerable consumers.”