FSA small firms review 'to probe investment suitability'

Advisers should expect a sharp focus on their investment propositions when the Financial Services Authority (FSA) begins its review of small firms later this year, according to Simplybiz managing director Matthew Timmins.

The regulator will conduct the reviews after completing regional Business Risk Awareness Workshops within the next few months.

Timmins said the FSA is likely to pay particular attention to investment suitability, an area where it has previously sounded warnings.

"One of the big areas of focus will still be investment suitability and whether the output of the advice matches with the clients' attitude to risk," he said.

"Are they in a suitable vehicle? Have the advisers followed a proper process? Is it consistent across the business?"

The FSA is to hold a series of workshops to inform advisers of what to expect from the reviews, and Timmins said Simplybiz would also provide support to members.

The regulator said it will also be paying attention to firms' financial positions.

In a message on its website, it wrote: "[The review] will also look at the financial soundness of your firm and your ability to continue to provide products and services to customers."

The reviews will take the form of either face-to-face interviews, telephone interview or an online or paper-based assessment and, in the cases where any risks are identified, will be followed up with further supervisory work.

The FSA will also conduct more in-depth reviews of a random sample of firms to test the effectiveness of its supervisory approach and ensure it is "taking the correct supervisory decisions".