Statement 1.208: Agencies

This Statement applies to all members in practice including affiliates, member firms and employees of member firms. Member firms are reminded that they are responsible for the conduct of non-members. The Statement should be read in conjunction with Statement 1.200 - Introduction and Fundamental Principles and the section of the Guide on Definitions.

(Revised with effect from [N2])

Introduction

1.0 The guidance which follows is intended to assist members and member firms in their arrangements with banks/building societies and other suppliers of services and products, whether or not these arrangements fall within the operation of the Financial Services and Markets Act 2000 ("the Act").

Appointed Representatives: Unauthorised Firms

2.0 Practising members and member firms can become appointed representatives of another person authorised to conduct investment business under the Act. When selecting which authorised person to become an appointed representative of, members should bear in mind the need to provide their clients with objective and independent financial advice. Thus a should not become an appointed representative of an authorised person that cannot provide objective and independent advice.

Bank/Building Society Agencies

3.0 The acceptance of an agency may represent a self-interest threat to objectivity and may tempt the member or member firm to subordinate its client's interests to its own (see also Statement 1.205, Conflicts of Interest and Confidential Information). A member or member firm should not be party to an agency by which it is constrained to channel all funds received by it for investment into a single bank/building society.

3.1 Members or member firms should not accept appointment as agents of a bank/ building society of which they are auditor (see Statement 1.201, Objectivity and Independence in relation to Assurance and Non-Assurance Engagements).

3.2 Members should not, because of the selfinterest threat, enter into any financial arrangements with a bank/building society either personally or through their firm which would prejudice the objectivity of themselves or their firm.

3.3 Before accepting or continuing an agency with a bank/building society members should satisfy themselves that their ability to discharge their professional obligations to their clients is not compromised.

3.4 A member or member firm should not in any circumstances conduct its practice from premises which give the appearance of being a bank/building society office and should ensure that any outward signs or literature used also do not give such appearance. (See also Statement 1.212, The Names and Letterheads of Practising Firms.)

3.5 Members should be aware at all times of the need to advise in the client's best interests. This is particularly important where a member or member firm is considering recommending the products of a bank/building society: with which he has an agency, and/or a principal or employee of the member firm is an officer of the bank/building society

Considerations relating to Authorisation under the Act

4.0 Even though advice on bank and building society deposits falls outside the Act, members or member firms advising generally on the disposition of clients' funds require a breadth of investment expertise and could require appropriate authorisation under the Act. Members should bear in mind that banks/building societies nowadays deal with a range of products requiring authorisation.

4.1 Though a member firm's operation of a bank/building society agency, restricted to simple-forms of deposit taking, does not require authorisation under the Act, the mere presence of agency signs and literature, together with the public perception arising from publicity of the increasing range of bank/building society products and services, could produce a real danger that the member firm might be perceived, by the public, as holding itself out as carrying on investment business. Should an unauthorised firm actually stray into the provision of investment business advice as defined by the Act, it would be committing a criminal offence.

4.2 In view of the risks outlined in paragraph 4.1 above, it may be inappropriate for a member firm to continue or to enter into any form of agency or other arrangement with a bank/ building society. However, if a member firm believes that its own special circumstances justify such an agency or arrangement, it will need to be able to demonstrate, in the event of complaint, that it has implemented safeguards and procedures adequate to guard against any breach of the law or any threat to its objectivity.

Other Agencies

5.0 Members and member firms which enter into other agency agreements for the supply of services and products, such as for the supply of computer hardware or software, should bear in mind the advice in paragraph 3.3 above as to independence, and Statement 1.205, Conflicts of Interest and Confidential Information.


Fundamental Principle 1 - "Integrity"

A member should behave with integrity in all professional and business relationships. Integrity implies not merely honesty but fair dealing and truthfulness. A member's advice and work must be uncorrupted by self-interest and not be influenced by the interests of other parties.

Fundamental Principle 2 - "Objectivity"

A member should strive for objectivity in all professional and business judgements. Objectivity is the state of mind which has regard to all considerations relevant to the task in hand but no other.

Fundamental Principle 3 - "Competence"

A member should undertake professional work only where he has the necessary competence required to carry out that work, supplemented where necessary by appropriate assistance or consultation.

Fundamental Principle 4 - "Performance"

A member should carry out his professional work with due skill, care, diligence and expedition and with proper regard for the technical and professional standards expected of him as a member.

Fundamental Principle 5 - "Courtesy"

A member should conduct himself with courtesy and consideration towards all with whom he comes into contact during the course of performing his work.

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