A compliance consultancy has raised the prospect that thousands of law firms who provide title insurance are either not directly authorised by the FSA or have failed to register on the FSA Exempt Professional Firms Register.
Commentators fear broker firms could become embroiled in a future scandal should a client have been mis-sold insurance by an unregulated solicitor.
Tony Rawlins, director of compliancy consultancy R-M Associates, said: “There is a general sense of apathy among many law firms over this issue, with many just burying their heads in the sand.”
He said the Law Society had arranged for all firms to appear on the FSA Exempt list until 18 March by which time all firms should have registered themselves.
However, the Law Society has confirmed to Mortgage Introducer that only 5,773 out of a possible 10,235 firms had actually registered.
Philip Ryley, head of financial services regulation at commercial law firm TLT Solicitors, based in Bristol and London, said: “I think this issue represents a real risk for both solicitors and their clients, as well as insurers and their agents, as it is our experience that some law firms have done very little to implement appropriate systems and controls to comply with the Law Society’s COB rules.
“If that is the case, customers may have claims for negligent advice and mis-sale in the future.”
Ryley said he knew from speaking to lenders in January that they did not receive the expected volume of IDDs or Demands and Needs Statements from law firms.
Isobel Rowley, spokesperson for the Law Society, said: “Those firms who did not contact us by at the end of March have now been removed from the list.”
The FSA would not comment on whether it was planning any action against solicitors who were carrying out unregulated insurance activity.
