Now that March 31 has passed, the FSA has published figures on numbers applying for authorisation.
Of the 3,545 existing FSA authorised firms who registered for variations in their permission, 2,811 application forms were received before the financial incentive deadline. For those of you who have chosen the appointed representative route, your principal – should its application be successful – will receive a 'minded to authorise' letter from the FSA later this month. I expect your principal will be keen to advertise that it has received its letter but nevertheless I recommend you also keep a keen eye on the Association of Mortgage Intermediaries' website as AMI plans to produce a list of firms that achieve principal status.
Turning now to direct authorisation, 5,945 individuals registered for a pack with over 4,200 benefiting financially from the pre-March 31 reduction in application fees. The total was below the FSA's expectations with the regulator attributing this to many mortgage professionals remaining undecided as to which route to follow. Sarah Wilson, director of high street firms at the FSA, advises that deadlines remain the same – in other words act soon. This is particularly prudent when you consider the FSA only guarantees confirmation of approval of your DA status within six months. April 30 is therefore a crucial deadline if you want to ensure you are able to trade post-Mortgage Day.
For those who have not previously experienced FSA authorisation, you must be aware that your application is only the first step in signing up to meet the requirements of the FSA handbook (a monumental tome) and training and competence sourcebook. Unless you are relying on the expertise – and of course cost – of a compliance service you have just over six months in which to produce the compliance and T&C manuals which are a fundamental part of your requirements. I expect that if direct authorisation is for you, you are already familiarising yourself with the FSA's principles and rules in its handbook, relevant policy statements and Mortgage Conduct of Business Rules. If you have yet to look at the handbook I suggest you take advantage of the FSA's recently published handbook guide as you will find it of great assistance in navigating around the main document. The handbook is not easy to use and the guide will prove invaluable, particularly as it is aimed at smaller firms with simpler business structures. I would especially recommend you read the questions and answers section. One final piece of advice – the FSA handbook contains minimum standards and you are well advised to go beyond these.
Compiling your T&C manual might initially cause you concern, particularly if you do not have first hand experience of a T&C regime. My advice is to first understand what T&C is before you begin to pen your manual. To quote FSA chief executive John Tiner: “Training and competence is a fundamental part of our regulatory regime and system. Clearly having competent people out there providing financial services to consumers is a major part of building confidence in the financial system and ultimately protecting consumers from inappropriate behaviour.”
Your T&C manual should be based around high level aspirational statements. The FSA will expect all firms to oblige by following the five T&C commitments which are:
Employees are competent
Employees remain competent for the work they do
Employees are appropriately supervised
Employees' competence is regularly reviewed
The level of competence is appropriate to the nature of the business.
These commitments apply to everyone. With sole traders there will, of course, be an element of self-supervision. In FSA speak, competence can be described as being able to show the necessary knowledge, skills and experience to do the job and then doing it to the required standard effectively and consistently.
The five commitments effectively reflect how you would like yourself and your staff to be perceived.
You will be relieved to know that the T&C sourcebook is nowhere near as bulky as the T&C handbook – just two chapters in fact. I will cover these in future articles.