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No point in delaying the inevitable

Last week we learned that a total of 10,510 firms have registered with the MCCB for the final run-in period of their non-statutory regulation. These firms are collectively responsible for 37,949 sales staff, an increase of around 3,000 staff over last year.

These figures perhaps belie the fears of those who have been predicting that the number of sales staff will fall post-Mortgage Day. After all, if many thousand of advisers are to cease trading in around four months&#39 time, why go to the trouble of applying for MCCB authorisation and take on the problems and costs of arranging all that PII insurance?

The MCCB also reports that the number of registered firms has dropped by 790 from those registered in the previous year. It attributes this fall to firms that have already decided to join a network and become an appointed representative (changes in the registration process mean that network member firms no longer have to seek separate MCCB registration). The reason for the increase in sales staff but the drop in the number of firms could also be because many advisers have decided to join a network as their first tentative steps in preparation for statutory regulation. But why begin to pay a network a fee or percentage of your commission now – why not wait until Mortgage Day? The reason is that advisers realise they will have to change their existing processes and procedures to conform to FSA regulation and have opted to do so now and utilise the know-how provided by a principal. Why delay the inevitable?

Some industry pundits believe advisers have buried their heads in the sand when it comes to regulation, leaving their decisions to the last minute. These pundits may find said sand being kicked back in their faces as more and more advisers opt for the services of a principal to help them through the regulatory changes. Indeed, activity from advisers enquiring and applying to join Whitechurch has increased tenfold over the past few weeks and I suspect that other networks are also experiencing an upturn. This is an indication that advisers are not leaving the decision to the last minute – or leaving the industry completely.

Furthermore this could also provide an indication as to why there have been lower than predicted numbers of advisers opting for the direct authorisation route. Advisers seem to be well aware of the extra compliance burden (for want of a better word) that the transition from MCCB to FSA regulation will bring and of course by joining a network the adviser is passing this responsibility on to their principal. Both for those who have experienced the FSA before and for those to whom it will be a new experience, the idea of having a principal between themselves and the regulator is obviously an attractive proposition. The downside, of course, is the financial cost. To coin an all-encompassing phrase (thanks, Ian McIver), the principal proposition is all about having the hassle of compliance and the pleasure of having to pay for it.

Putting statutory regulation aside for now, don&#39t forget there are also a number of dates for the diary to keep our current regulator happy:

June 30 Deadline for receipt of the MCCB&#39s Annual Complaint Report covering the period May 1 2003 to April 30 2004. Even if there are no recorded complaints you must still return a &#39nil return&#39 to confirm this and meet with the MCCB&#39s reporting requirements (See MCCB Registration Rule 5.1.6.7).

August 1 From this date the MCCB requires that only the new versions of You and Your Mortgage and You and Your Equity Release Mortgage leaflets be provided to customers. These versions cater for the possibility of their mortgages completing after October 31 2004.

It is also worth keeping an eye on the MCCB&#39s website (www.mortgagecode.org.uk) as it will shortly issue a further Good Practice Note offering guidance on MCCB-to-FSA transitional issues, although this will also be covered in July&#39s MCCB News.

If there are any areas you would like me to cover in future articles please contact me in the usual way at mortgage.strategy@centaur.co.uk.

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