Phoenix directors could face scrutiny by the FSA

28 June 2010 | By Natalie Thomas

Directors of firms that have phoen-ixed could be in the firing line under the Financial Services Authority’s approved persons regime.

Under its fit and proper guidelines the regulator will look at whether a person’s reputation might have an adverse impact on their company, or whether they have been involved with a firm that has gone into insolvency, liquidation or administration.

Robert Sinclair, director of the Association of Mortgage Intermediaries, says the FSA has not had the chance to make a judgment like this in the past but that could change.

He says: “The FSA might have taken more action in the past if it could have.”

Ed Harley, director of mortgage policy at the FSA, says: “Action will depend on the circumstances of each firm. Some companies get into financial difficulties and can no longer operate while others have gone down under a cloud of ignominy. We are conscious of that.”

The regulator unveiled its individual authorisation proposals last Friday, saying brokers as well as lenders’ branch advisers will be held personally accountable for their actions.

It says that if a broker knowingly or recklessly provides information that is false or misleading they will be committing a criminal off-ence and could face prosecution.

Brokers must disclose to the regulator any past convictions or dealings with firms that might count against them.

Harley, says: “If brokers think something is relevant but are not sure they should include it anyway.”

He says the FSA also wants to establish the financial situation of brokers. If applicants have debt it will depend on the nature of this, and cases will be judged on an individual basis.

There have been concerns that a number of brokers will be blacklisted because of missed payments resulting from their networks going bust.

But Harley says: “We’re not in the business of cutting professionals out of the industry and will apply a common sense approach.”

Sinclair also has concerns about those who are exempt from the rules in cases where no money is advanced.

He says: “Consumers deserve the same level of protection when remortgaging as when taking out the initial mortgage, particularly as fees can be high for this. We hope the FSA will demand the same standards for both transactions.”

But Harley says: “If the customer asks for advice then we would expect the adviser to be individually registered. But where a borrower is looking to transfer to another rate there would be no money involved.”

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