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Survey reveals firms are failing in the compliance stakes

Directly authorised mortgage companies and individuals are failing to ensure that they are in a position to deliver a compliant sales infrastructure by Mortgage Day.

A Professional Mortgage Network survey of 400 organisations that are to assume directly authorised (Principal) status under the FSA&#39s statutory regulatory regime reveals that:

•81% of directly authorised respondents have failed to recruit a suitably qualified individual, or team, to manage the compliance function post M-Day.

•73% of all respondents have not appointed a third party, whose primary responsibility is to ensure they meet their compliance obligations.

•71% have failed to subscribe to the services of a network support specialist like PMN.

• 62% have spent less than ££2,000 on creating a new compliance infrastructure.

• 50%are unsure of how they go about extending their lending panels to ensure they represent the whole of the market.

Dale Knight, PMN managing director, says: “The results of the survey should be a cause for concern for everyone associated with the mortgage industry.

“The number of directly authorised firms represents a large proportion of the UK&#39s intermediary community. We have analysed the responses of a significant number of these companies and individuals and the overwhelming majority are leaving it very late to be ready for the FSA&#39s regulatory world.

“They seem to underestimate how much statutory regulation will affect them. When it does arrive, in October, many think it will mean minimum change to their modus operandi. I can only conclude that the industry as a whole has failed to deliver a consistent message and that is why such large numbers of directly authorised organisations are paying lip service to the FSA&#39s benchmark criteria.

“My hope is that lenders, packagers, networks and the regulators will get their acts together to ensure that principal companies start to realise what their obligations are post Mortgage Day. If they don&#39t there is likely to be a lot of companies falling foul of the regulator sooner rather than later.”

Under the FSA, directly authorised firms must deliver a compliance system that is able to accurately record all regulated sales. Firms must also be able to monitor and identify ongoing training needs (external and internal) and ensure that are conversant with all changes that affect the sales process.

Knight says: “My biggest concern is that directly authorised firms are not doing enough to secure their long-term futures. There needs to be a major shift in attitude, whereby regulation is seen as a business enabler not something that is feared.

“Applied properly, a strong and user-friendly compliance structure will deliver major competitive advantage to a directly authorised organisation. Those companies that fail to grasp the nettle will not only experience an adverse impact on their business in the short-term, they will also severely shorten their life span.”


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