Regulation is a game of two halves

The FSA has now published the latest statistics on firms that have applied for direct authorisation. These figures show the situation at the end of the discount period that ran up to March 31. So, what trends can we see, what does it mean for the future shape of the market and, for those yet to apply, what are the lessons to be learned?

If this was a football match, we&#39ve just seen the end of the first half. The second half finishes at the end of April when the FSA&#39s six-month guaranteed period elapses. Under statute the FSA can take up to six months to consider an application for direct authorisation (please note this is a completed application and not a rushed 90-minute one).

At the risk of stretching the footballing metaphor too far, there is of course extra time. This is the period after April when firms can continue to apply for direct authorisation with their fingers crossed that they make it through the system in time. Intermediaries are advised to avoid this route of course, as those who don&#39t receive their authorisation will be ineligible to play after October 31.

At the end of March the FSA had received 13,210 registrations from mortgage and general insurance firms. Of these 5,945 were mortgage-specific and, in terms of actual applications, 2,960 mortgage firms had submitted their forms. The majority of these had done so using the electronic option.

Online correspondence with the regulator will shortly become a common business feature for directly authorised firms. The FSA has now finalised the details of its regulatory reporting requirements and those holding out for manual submission will be disappointed. The days of penned and posted registration or reporting have passed and all firms will have to submit reports online from 2005 as a central pillar of the new regime.

Though AMI successfully lobbied for smaller firms to be given longer to adapt to this system (a one-year cycle until 2006) the majority will have to complete the reports on a six-month cycle. If you&#39re a member, expect constant updates from AMI on the reporting proposals – including a pilot – over the coming months. If you aren&#39t a member, what are you waiting for?

As for IFAs, it appears that 3,545 had registered to vary their permissions and getting on for 3,000 had actually applied. Using the MCCB figure for the total number of mortgage intermediary firms (13,000), this means that almost half of all firms have registered but less than a quarter have actually applied.

The majority of applications came through in the last few days of the discount period. If this pattern was to be repeated at the end of April we could yet end up with almost 6,000 firms seeking direct authorisation – that&#39s roughly half the market.

Of course there are always those who can&#39t resist the exhilaration of extra time and who, despite all the warnings, will not submit their applications until the summer. The number of firms leaving it late is hard to estimate but needless to say this route is not recommended.

Still, this is all conjecture based on FSA statistics. What I know for sure is that there was a high volume of calls coming through to the AMI helpline at the end of March. We are preparing for a similar rush at the end of April and it&#39s pleasing to report that we have been able to help every member who has called, emailed or faxed with their applications queries in recent weeks.

We are well-versed in answering the most common questions that crop up – and some of the more obscure. Here are a few pointers for those who are missing out on the free helpdesk service: Watch out for the &#39000&#39 on income-related questions as they are already on the form – some firms have inadvertently declared themselves the among largest intermediaries in Europe by failing to spot this. Also, take care when ticking the approved person boxes as the position is different for sole traders. And finally be careful with the declarations. The FSA is checking that firms are putting these in place and they must be in order.

I Should Know But I Don&#39t

Q: I&#39m a mortgage broker and so I advise on general insurance. Is this going to be regulated too?

A: Yes but the dates are different. While mortgage regulation starts on October 31 this year, general insurance or pure protection regulation will not start until January 14 2005. You will have to be authorised by the FSA if your business includes one of the following regulated activities:

• Arranging: Including introducing a customer to an insurer or insurance broker, helping fill in an application form or sending a customer&#39s application to an insurer.

• Advising: This includes recommending a specific insurance policy to a customer.

• Dealing as an agent: Entering into an insurance contract with a customer on behalf of the insurer (e.g. if you issue cover notes) or vice versa.

• Assisting with administering insurance policies: Letting the insurer know about a claim and negotiating a settlement. Note here that when you are only handling claims on behalf of the insurer and not the customer this will not be a regulated activity and neither will be simply providing information to a claimant or insurer in connection with the assessment of a claim.

The fact that introducing is a regulated activity will be a surprise to many people. This is just one of the differences between the GI rules and the mortgage rules.