In a recent article I promised to have a more detailed look at the FSA application pack. I am a man of my word and we will look at this in a moment but first I want to make sure Mortgage Strategy readers are up to speed on some other recent bits of regulatory news which might have passed them by.
Regulatory position of packagers
AMI had been increasingly concerned about the ambiguity of packagers' regulatory position. It seemed straightforward if they were simply performing an outsourced function but those who were running a panel, negotiating exclusives, arranging higher procuration fees and providing guidance to brokers looked like being caught under 'arranging' in regulation.
AMI pressed the FSA for clarification and recently received a statement which brought the required clarity. To paraphrase at the risk of omission, packagers, even those undertaking the functions described above, are officially outside the scope of FSA regulation. AMI members have already received a full briefing on this news.
The Financial Ombudsman Service has been consulting the industry about its charges for next year. Naturally AMI has been involved in this process, pressing our members' cause. The FOS has reviewed its complaints statistics and has concluded that there is a strong case for moderating the impact of case fees on occasional users. It is proposing to drop the case fee for the first two complaints in any one financial year, commencing April 2004. So firms will get two free cases per year. This will apply to mortgage and general insurance brokers when they join the scheme. AMI has encouraged and supported this initiative and awaits with interest the final decision on the cost of the annual levy.
And now, as promised, the subject of the application pack. To get your copy of the application pack call the FSA's contact centre on 0845 605 5525. Alternatively, you can register for an application pack using the FSA's website www.fsa.gov.uk/mgi You can also see a sample of the application form on the FSA website at www.fsa.gov.uk/mgi/sampleform or on the AMI website at www.a-m-i.org.uk The current sample pack consists of two forms:
HSF 1 – information about the firm.
You will need to provide information on basic firm details, your activities and previous regulatory status. There is also a lengthy section of tick boxes where you need to disclose information on your past financial standing. The FSA also wants you to tell it what regulated activities you wish to apply for. You will need to disclose information on those who run the business. Those with a shareholding of 10% or more will need to be named and provide information. Next comes the useful section on 'close links'. It is important organisations understand what is being asked for here and complete it fully.
HSF 2 – information about the individuals who run it.
The FSA is looking for details of those who will be performing a controlled function and about an individual controller. As AMI found out, those performing the compliance function do not need to be approved persons (unlike in the investment market). However this does mean other senior personnel, especially the chief executive, must be well briefed on what is happening in compliance.
We are still waiting to see HSF 3 which deals with appointed representatives and the three annexes – the first for regulatory business plans (not now needed for firms with an annual income under £1m), the second on systems and the third applicable only to lenders and administrators.
AMI members can contact us for help and guidance in completing the application pack. The FSA's contact centre can also help out. Regulation is moving apace. Think now about how it will affect your business because it's too late.
Your chance to ask AMI
Charles Gooding – AMI chairman
Q: What is 'advising'?
A: The FSA has said that you will be caught by under mortgage regulation if you either advise or arrange mortgages. Naturally, intermediaries wonder what is the covered by the term 'advising'.
The FSA has said that not all kinds of advice will be covered by the new regime. For advice to be caught it must:
Be given to someone who could be – or is – a borrower.
It must also be specific on the merits of:
Entering into a particular regulated mortgage contract
Varying the terms of a regulated mortgage contract.
The FSA gives a series of examples which it hopes will help clarify the scope of the term advising. These include:
” I recommend you take out the ABC bank two-year fixed rate mortgage at 5%”. This is advice as it steers the borrower in a specific direction.
” I recommend you do not take out the ABC bank two-year fixed rate mortgage at 5%”. Again, this is advice as it steers the borrower away from a particular mortgage.
” I recommend you take out (or do not take out) a mortgage.” This is not advice as there is no specific recommendation.
It will be a criminal offence to carry on any advising activities without being directly authorised or an appointed representative of an authorised firm. For more information on this, members of AMI can call the AMI helpdesk on 0207 628 1288.