January 2019
By Steven Howard, Head of Mortgage and Lending Intermediaries Compliance Services
As we approach the end of the first twelfth of 2019, there is much on the compliance calendar and this regular slot will allow me to expand on some of it throughout the year. There are a number of ‘big ticket’ items heading our way in 2109 that are likely to have a substantial impact on the way regulated brokers carry out their business. This will include areas such as the Senior Managers and Certification Regime that comes into effect at the end of the year, which we have referred to in a number of issues of Advantage already. In addition, the FCA will be publishing its final report on the Mortgage Market Study in the Spring and from that may come further recommendations.
Other items on their agenda include:
Some of the above is less applicable to your sector than others but there are some key elements that I feel any firm in the financial sector should have in place, at the start of a year whether regulated or not, as they just make for good business practice as well as having the ability to help with profitability and security – and purposely missing the B word, in unusual political atmospheres! Many of the below will have the resulting effect of removing risk from your business and that can only be a good thing.
Processes and procedures: Ensure these are clearly documented. This has value to a sole trader should there be a requirement for inspection and even more applicable to firms where there are individuals operating under a principal. Having a clear ‘Firm view’ in respect of the way in which business takes place, the commissions that are paid and that the presentation of the final outcome can only be of benefit to the client.
Assessment and vulnerability: Are you confident that your processes fully assess the ability of the persons involved in managing the repayment as required? Has vulnerability been fully assessed prior to any funding being secured and are processes in place that would highlight this as a factor?
AML and Financial Crime: Where today’s world requires the need for a constant focus on financial crime and anti-money laundering, the Government and the FCA have laid out defined expectations of those that provide access to finance at all levels. They are working towards ensuring that the UK becomes a hostile place for criminals and to play your part and to reduce any risk to your own firm there are some very simple electronic checks you can make that will offer confidence either against money laundering or becoming involved, however innocently, with politically exposed people, for example.
Introducers and the role they play in your business: One key area where brokers need to be in complete control is Introduced business. If you are a regulated broker, then your introducers should have the same or a lower level of FCA approval. However recent findings have highlighted an issue that brokers need to be the managing party in these relationships and the financial arrangement at hand. The introducer’s role, other than to maintain the relationship, is a secondary one and they shouldn’t be involved in any process or appear to be arranging things themselves. It is the broker receiving the introduction that should be issuing all the paperwork under their own brand, as it is essential that the client is fully aware at every stage of the process, who is arranging their finance.
Culture, accountability and governance: These should be the three key drivers in a firm developing positive behaviours that result in benefit to end consumers. Having the right people in the right roles is key to the success of this and this will be evidenced effectively with the Introduction of the Senior Managers and Certification Regime later in the year.
I will discuss more about this and the other points listed in this article as the year progresses and as ever if you are looking for more information in relation to good business practice and compliance issues, please feel free to give the FIBA team a call.