There is an increasing amount of regulatory information to be found in speeches made by the key Financial Services Authority (FSA) spokespeople – and the wisdom contained in these speeches is not just for those hearing the words at first hand, but also for all other regulated firms. That’s why the FSA puts the speeches on its website and issues press releases about them.
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A speech made recently by Stephen Bland, director of small firms and retail intermediaries’ sector leader at the FSA, is particularly relevant to the mortgage and general insurance (GI) sector, as it sought to warn smaller firms that they are certainly on the FSA’s radar. Two key points were made to redress wrongly held ‘myths’. First, that there are so many small firms that they lie below the reach of the FSA’s radar and, secondly, that appointed representatives (ARs) are leaving the onerous supervisory regimes of networks in their droves to enjoy the virtually carefree environment of directly authorised (DA) FSA supervisory activity.
Bland explains the FSA’s approach as concentrating on giving help to firms that want to run their businesses profitably and compliantly, but also bearing down on firms that are not interested in meeting FSA standards. Data on this latter category is collected in a number of ways. Retail Mediation Activities Returns must be submitted by every firm twice yearly, and product sales data is supplied by providers, which includes the products sold, the brokers involved, the methods of selling and some customer information. Other information comes from outside sources such as the police, Customs and Excise, the Department of Trade and Industry, other law enforcement agencies and whistleblowers, together with the Financial Ombudsman Service, the Office of Fair Trading and other regulators at home and abroad. Internal FSA information is sourced via the firm contact centre, the customer contact centre, and project work, including mystery shopping.
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Regarding the idea that ARs are flocking to achieve DA status, in the first three months of 2007 the number of AR financial adviser firms rose by more than 150, while in the mortgage and GI sector the number of DA firms fell by about 9 per cent in the last year, while the number of ARs rose by around 11 per cent. Bland said this could indicate that small firms are realising they are on the FSA’s radar, and are seeking compliance support.
In brief, in another recent speech Mandy Spink, the FSA’s head of mortgages and credit unions, warned small mortgage firms that they should be “engaging” with the FSA’s communications and especially on the key topics currently under review: non-conforming, self-certification and affordability. This entails some positive action on the part of the regulated firm, in seeking out the information, making sure that staff read and understand it, and making sure this is all recorded on their training records.
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A decision on principles
Q1: The press have said a great deal about principles-based regulation, but I’m not sure where to start in preparing my firm and staff. I am committed to being as compliant as possible – can you point me in the right direction?
Bill answers: A good start would be to read the FSA’s paper on principles-based regulation called ‘Focusing On Outcomes’. This can be found on the FSA website, and makes it clear what the FSA means by principles-based regulation and consumer outcomes. Once you understand the approach, can I then suggest you prepare an action plan. This will give you personal focus and by reading the FSA’s milestones for principles-based regulation – on the same website – you can see what you need to do within your firm. FSA roadshows will give you both reassurance you are addressing the right things, and a direction.
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Lost in cyberspace
Q2: Me and my colleagues, including our compliance officer, find it very difficult to find our way around the FSA’s website at times. I know this subject has come up many times before, but can you suggest a quick way of going straight to most of the mortgage pages?
Bill answers: I know from reading various comments and speaking to a senior member of the FSA’s team very recently, responsible for communicating with small firms especially, this is something the FSA is acutely aware of and is keen to provide further help to enable firms to more speedily access the information they need. The FSA’s web page dedicated to advisers is a good place to start as it contains the latest news and developments, in addition to topics such as regulatory reporting and disclosure. Go to http://www.fsa.gov.uk/PagesDoing/small_firms/mortgage/index.shtml and you will find a number of links to key subject, reports and recent speeches from this location. Another very useful page is www.fsa.gov.uk/mortgage – this will also provide both useful and focused information and further related links.
Evidencing TCF
Q3: We all need to be able to evidence our compliance with ‘Treating Customers Fairly’ (TCF). What ideas or approaches can you suggest?
Bill answers: Dependent on the size of firm, the ability to generate management information from your IT systems can greatly enhance both the ease of collecting information and the quality and accuracy of the data. For example, those advisers using the Home Buyer System will, I understand, shortly be receiving details of a TCF management information capability which Home Buyer has designed to draw data from its system to produce data that can presented supporting the TCF outcomes. All of this is done automatically and will therefore aid firms and their managers in demonstrating how they are supporting and delivering TCF. Simple records of sales by product type and adviser can enable the firm to show, for example, no product or lender bias, thus helping to demonstrate that the most suitable product will most likely have been recommended using actual client needs as recorded in the factfind.
