Richard Angliss, Home Buyer’s managing director, commented: “As the FSA’s enforcement action against Thinc group – including a £900,000 fine – demonstrates, there are still major gaps in the systems and controls and record keeping arrangements operated by many firms that are advising on mortgage sales. In our experience, many regulated businesses are failing to understand what is required of them under FSA regulation. We believe there are three key areas that need the most attention: a clear and demonstrable sales process; checking the checker; and risk-based supervision.
“Many mortgage and GI businesses still do not realise that they need a demonstrable sales process, which shows that the customer was treated fairly before, during and after the sale. The CML’s response to the FSA’s recent stage two report on its MCOB effectiveness review of the lifetime and sub prime sectors said that the FSA may have missed a trick in failing to incorporate a ‘reasons why’ letter into its own rules. However, this one piece of documentation is not the complete answer, and built in systems need to proactively prompt compliance action points.
“Firms – and particularly networks that have responsibility for ARs – also need a clearer understanding that they must check the checker. This is an important part of responsibilities under FSA Principle number 3 that covers management systems and controls. The FSA’s recent factsheet “Your responsibility over appointed representatives” gives further information around this topic.
“Thirdly, firms need to understand that case checking procedures should be based on risk. The work of new advisers needs to be checked more frequently than that of experienced advisers with a good track record. In addition, higher risk business (interest only, sub prime, loan term into retirement etc.) needs a higher level of checking than more mainstream cases.
“With TCF deadlines looming, brokers and networks looking for a long term future must address these issues without delay, and put in place sytems that will provide the necessary safeguards against failure to comply with the FSA’s Principles.”
