Regulators in Britain say they are following up a review carried out last year, which found widespread suitability failings, with a new review focused on firms’ internal controls and an examination of whether firms have done enough to remedy any client harm.

In June of last year, Britain’s Financial Services Authority (FSA) published the results of a compliance review of wealth management firms, which found “significant, widespread failings”, particularly in terms of ensuring suitability. Of the 16 firms it reviewed, it found that 14 pose a high or medium-high risk of detriment to their customers due to suitability issues; and, 79% of the files it reviewed had a high risk of unsuitability, or suitability could not be determined.

At the time, it wrote to the chief executives of all wealth management firms to detail its findings, and it has since delivered a series of seminars to compliance officers and others to ensure they understand the regulator’s expectations. Now, it plans to go back and look at how firms have done in fixing systemic suitability failings, and in fixing any harm clients may have suffered as a result.

The FSA says it has continued to work with the firms that were part of the initial review in order to correct the deficiencies it uncovered, and this has led to referrals to its enforcement division, it notes. Now, it says it will be interviewing key individuals from those firms to understand how they have remediated the problems identified in their client portfolios, and, in particular, whether they have been sufficiently rigorous in identifying and dealing with past detriment that consumers may have suffered. And, it will consider whether any further regulatory action is needed.

Additionally, the FSA says it is planning a new review of firms’ internal controls regarding suitability. It notes that its initial review, “gave rise to concerns that there is an unacceptable risk of clients of wealth management firms experiencing unfavourable outcomes”, and that this may indicate deficiencies “in the management and control architecture of firms.”

“We have now commenced a new phase of thematic work and will, again, be making judgements on the suitability of client outcomes; but also complementing this approach with a direct assessment of firms’ systems and controls,” it says. “We will be acutely interested in whether firms have heeded the warnings and concerns contained within our previous communications.”