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FSA washes hands of AR shortfall problem

Industry sources have warned of blood on the carpet unless the Financial Services Authority warns networks to declare the true number of ARs they expect to get.

Already there is growing concern that many mortgage networks could be guilty of a regulatory breach unless they make sure any shortfall in the number of ARs they will have by Mortgage Day is communicated to the FSA.

In this way, if a network originally told the FSA that it was looking for some 300 ARs but is now looking at enlisting closer to 100 ARs, an explanation would have to be given.

“People who have been approved could be in breach of the threshold conditions,” one source warns. “The FSA should be more proactive and warn them of any changes.”

However, the FSA says this concern is nonsense, arguing that networks are required to inform the FSA of any changes to their business model.

“It is a requirement anyway that networks have to inform the FSA of the number of ARs they have on their network as part of the regulatory information they submit,” says Robin Gordon-Walker, spokesman for the FSA.

Regarding whether the threshold conditions could be affected by a sudden drop in the number of ARs, he says that this isn&#39t the case. And it&#39s certainly beyond the FSA&#39s remit to comment on or critique the viability of firms&#39 business plan with regard to the number of ARs they have.

“We try to interfere in the market as little as possible,” adds Gordon-Walker.

There is also growing confusion among both ARs and networks about whether minded to approve letters were necessary in the first place – especially now that Part IV authorisation letters have started to land on doormats across the country.

One large network that has yet to receive its MTA letter, let alone its Part IV authorisation, shocked its would-be ARs when asked if it had received its MTA.

“We have got principal status,” it told the potential recruits. “We don&#39t need an MTA. Pay no attention to the trade press. They&#39ll write any old rubbish to raise a tidal wave just so they can report on damage to the shoreline.”

Choice remarks indeed. But as one of the would-be ARs attending the relevant seminar reported back to Mortgage Strategy, in this instance it was clearly a case of the network starting to panic.

“There&#39s no chance that I&#39m going to join a network that hasn&#39t received its MTA letter by now,” our concerned broker says. “There&#39s less than six weeks left until Mortgage Day and I for one will not be in a position where I can afford to stop trading because I have signed up to the wrong network.”

The confusion over MTAs was compounded further after Bristol-based Manor Mortgage Network bypassed the MTA stage altogether when it received formal notice that it had received its Part IV authorisation earlier this month.

While positive news for the firm, it does further muddy the waters as to what firms should expect.

As one incredulous industry pundit put it: “Are you sure the MTA hadn&#39t just been lost in the post?” All your network questions answered by the industry&#39s leading experts Q: How often will I have a compliance visit/audit?

All your Network Questions Answered By The Industry&#39s Leading Experts

Q: How often will I have a compliance visit/audit?

Bill Warren is network director at the Compliance Network

This depends on your principal and the quality of your output. Normally there will be a minimum six-monthly visit but at Complete we intend to visit more frequently initially to help ARs get used to the new rules.

Chris French is managing director at the Mortgage Marketing Centre

We plan to visit our ARs at least once a month on average. If the AR is assessed by us as low risk then the visits will have a light touch. If the assessed risk is medium, high or deteriorating then visits will be more frequent, and with more training and supervision.

Elliot Stoneham is commercial and IT director at Pink Home Loans

All Pink appointed representatives will receive a compliance visit within the first three months of being authorised. A full audit will be carried out at least annually. However, because Pink uses a risk-based approach to compliance, additional compliance audits or training and competence visits may be made if we identify through monitoring that the appointed representative requires further assistance.

Frank Thurlby is head of compliance at Genesis

Your network is responsible for your compliance and will visit you regularly to ensure you are adhering to procedures and verify your continuing competence. The number of visits will depend on the nature and size of your business and the risks your firm poses to the network. You can expect a minimum of two visits per year if you are a Genesis AR. Other networks may have different strategies.

Chris May is director of Mortgage Time

This will vary depending on whether the consultant has passed CeMAP or has passed the company&#39s competence requirements. It should be as often as is needed but can be as little as once a year.

Richard Griffiths is managing director of Network Data

With some networks, there will be none – they don&#39t have any compliance officers as far as I can tell. The more professional networks are likely to adopt a risk-based approach with the better ARs receiving two or three visits a year and riskier ones getting far more frequent visits.

Martin Cave is managing director of Home Loan Partnership

HomeLoan Partnership will centrally monitor your key performance indicators and your ongoing training and development. If network standards are maintained, you will have a routine on-site compliance audit annually.

Richard Coulson is director of Zurich Mortgage Network

Regular supervisory visits will be made to enable mortgage advisers to be supervised efficiently. In terms of compliance visits/audits, the frequency will depend on the adviser/firm&#39s key performance indicators and the risk profile that these present. The greater the risk profile and poorer the key performance indicator results, the greater will be the likelihood of a visit.


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