In the AMI newsletter, sent to its 17,000-plus members, AMI sought to clarify continued confusion over how the FSA’s client money rules affected mortgage brokers.
It 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.”
Mortgage Introducer has been inundated with concerns from intermediaries saying the regulator has made it clear that mortgage brokers do not need to seek its permission to hold client money, although they do need to have the proper capital adequacy in place.
John Mawdsley, director of The Mortgage Partnership, received confirmation from the FSA only last week that its client money rules do not apply to mortgage business.
The FSA e-mail said: ‘Client money rules do not apply to mortgage business. However, if a firm does hold client money for mortgage business, this factor still does need to be taken into account when calculating the firm’s capital adequacy requirements as per PRU 9.3.30R of the FSA Prudential sourcebook. The permission to hold client money is not requir-ed for mortgage business.’
Trevor Quinn-Thomas, director at The Coaching Platform, received similar confirmation from the FSA. He said: “Admittedly, the position isn’t as clearly stated in the rules as one might hope. Nevertheless, the position is that mortgage mediation activity does not fall under the client asset sourcebook.”
But Ben Stafford, policy officer at AMI, insisted: “Factually, our newsletter is not incorrect. For the majority of mortgage brokers they will not hold client money. But some inevitably will and they will have to make the FSA aware of this. It is not ‘full-on’ permission like getting authorised but the FSA does need to know.”
