They can clearly see the potential of establishing appointed representative networks, but how many of them have calculated their capital resources requirement?
The most generous interpretation of CP174 is that the principal will only need capital resource of 5% of its own annual net brokerage income. To most serious contenders, this should not prove much of a barrier to entry. However, it is a totally different proposition if the 5% capital resource requirement relates to the annual net brokerage income of the principal and its entire network rather than just to the principal firm itself.
Frank Thurlby, head of compliance at Genesis Home Loans said, “Many potential principles are concerned with the lack of clarity in CP174. I think most principles are taking the optimistic view that the capital resource requirement relates to the activities of the principal firm only. If this turns out not to be the case, then I can see a big reduction in the number of potential principles. I would be surprised if the FSA’s intention is to place more onerous capital resource requirements on mortgage principals than those currently applying to IFA principles. But until the FSA clarify rules, the uncertainty will continue.”
