A Professional Mortgage Network (PMN) survey of 400 organisations that are to assume Directly Authorised (Principal) status under the FSA’s new statutory regulatory regime reveals that:
- 81 per cent of Directly Authorised respondents have failed to recruit a suitably qualified individual, or team, to manage the compliance function post M-Day.
- 73 per cent of all respondents have not appointed a third party, whose primary responsibility is to ensure they meet their compliance obligations.
- 71 per cent have failed to subscribe to the services of a network support specialist like PMN.
- 62 per cent have spent less than £2,000 on creating a new compliance infrastructure.
- 50 per cent are unsure of how they go about extending their lending panels to ensure they represent the ‘whole of market’.
“The results of our survey should be a cause for concern for everyone associated with the mortgage industry,” said PMN managing director Dale Knight.
“The number of Directly Authorised firms represents a large proportion of the UK’s 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’s new 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’s new 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’t 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.
Added Dale Knight: “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.”
For the last three months, PMN has led the industry debate on regulation – and how it affects networks. Recent campaigns include helping many Appointed Representatives to choose an appropriate network partner – and highlighting the hidden dangers to networks of the FSA ‘arrow’ visit.
