Mortgage Introducer flagged up the issue in March following broker and packager concerns that if they did not have authorisation to hold client money they would be unable to hold cheques from customers for valuation fees.
At the time the FSA said its client money rules applied to investments rather than mortgages so brokers would not need to seek permission to hold client cheques.
But AMI has informed its members that the stance has now changed.
The trade body said: “There has been some confusion over the issue of client money and valuation fees.
“Put simply, if a mortgage intermediary holds client money the firm will need the FSA’s permission to do so and the increased capital requirement this entails.
“Where a firm accepts into its own bank account payment of say, valuation fees for either the lender or the surveyor, then these will be considered client monies from the point-of-view of the capital requirements.
“If the intermediary simply receives a cheque made payable to a third-party lender or valuer and passes it on, this is not considered to be client money.
“It appears that an intermediary firm can of course run various promotions including free valuations and still charge for its own services. As the FSA recently re-confirmed: ‘an intermediary’s fees for his own services would not be client money’.”
London-based sole broker Roy New said: “This question about client money has come up a few times. I would just have the client make out the cheques to the lender so I would not need to seek permission. I do not want to hold client money.”
