Last week, Mortgage Strategy revealed that the Financial Services Authority was focussing its attention on networks’ controls over their appointed representatives and financial promotions.Away from the perimeter, another issue the FSA has identified is how some newly authorised networks control financial promotions. Clive Briault, head of retail markets at the FSA, says: “We had concerns about newly authorised networks’ controls over ARs.” So, this week Mortgage Strategy asks: “Is the FSA right to say networks need to have greater control over their ARs?”
John Malone, Premier Mortgage Service – I am amazed the FSA did not realise networks have little or no control sooner. When you are a principal and a network you do not own or employ the company members. It is so easy to become an AR but there is no loyalty incentive to comply. The idea that principals control their members is absolute rubbish. It’s hard enough to look after children who are your own flesh and blood. Networks have all the responsibility without reward or real management power.Chris May, The Mortgage Times Group – Yes, networks should have more of the necessary procedures in place to ensure compliance. But we are responsible for our ARs and ensure adequate control – we had an FSA visit recently. After Mortgage Day, there was a grace period to allow for relevant staffing. We have a TNC officer for every other adviser but the super-networks may struggle to have the right degree of control. Richard Griffiths, Network Data – We had our visit from the FSA and they were dropping hints about other networks. No names were mentioned but what Briault said is quite true and they are looking more closely at the newer mortgage networks. It’s obviously good news. They suspect quite a few of them don’t have the appropriate compliance checks and controls in place, often purely down to the fact they don’t have enough staff. Alan Scotter, Skipton – We understand FSA may have concerns over newly authorised networks. Much will depend on the experience of those firms in operating in a regulated environment. Skipton established two new networks, Pink and Enable. However, the group has long experience of working with the FSA via the building society parent and the group’s three financial services subsidiaries. Consequently, we are confident that the compliance regimes established for the networks are extremely robust and ensure that the required degree of control over ARs will be clear in the event of an FSA visit. Martin Reynolds, BM Solutions – I’m sure all lenders as well as networks will welcome this review. Certain sectors of the industry are still in a transitional period in understanding the Mortgages Code of Business. I’m sure networks will welcome the chance to learn from the review and it is pleasing to see the FSA is not using this as a chance to be heavy handed but is rather helping provide consistency of interpretation. Jeff Knight, GMAC-RFC – An AR has a contract with an authorised firm which allows it to carry on certain regulated activities. The principal is responsible for its compliance within the regulatory regime so if the AR makes a mistake it is the principal who will be liable. The principals take a lot of the impact of regulation and should have sufficient controls in place to monitor the activities of their ARs. Dev Malle, Pink Home Loans – Networks should have greater control over their ARs. That’s why Pink holds quarterly and half yearly educational seminars, the most recent ones of which have been at Leeds, Warwick and Reading universities. These are also used to explain what the network expects from its ARs. Pink takes control and compliance very seriously. Interestingly, DAs have also been requesting our compliance support because they feel vulnerable without a network.