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FSA withdraws authorisation from dealer over lack of capital resources

The Financial Services Authority has cancelled the authorisation of a motor retailer for lack of capital resources. The decision has prompted warnings to the sector on dealers’ compliance around selling insurance products.

4Front Car Sales Limited was authorised and regulated by the FSA to sell general insurance.

It also had permission from the FSA to ‘hold client money’ in relation to selling GI.

Holding client money meant the FSA required 4Front to have increased capital resources.

4Front did not hold enough capital resources and notified this fact to the FSA in its Retail Mediation Activities Return.

Lorraine Tromans, group compliance manager at Alliance Consultancy, said: “Under FSA rules an authorised firm must maintain adequate financial resources in order to meet its liabilities as they fall due.

“The level required is dependent on the nature of business and permissions a firm holds.

"In 4Front Car Sales Limited’s case it had permission to hold client money and did so in a non-statutory trust account which made the company a perceived higher risk and set their minimum capital adequacy requirement at £50,000.”

Tromans said the FSA’s enforcement action was a “clear message” to dealers of the importance of ensuring they have the right FSA permissions and that information in RMAR returns is accurate.

“The FSA does not need to turn up at your dealership, or need customer complaints to identify compliance failings,” she said.

> FSA notice on 4Front Car Sales Limited at

> The AM Compliance programme, in partnership with Alliance Consultancy, is designed to help dealers be fully compliant with the regulations governing the sale of insurance products. For details go to

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