COMMON MISTAKES COMPLETING THE APPLICATION FORM
We've identified some common mistakes firms are making when filling out the application form. Don't make the same mistakes - follow our tips and you'll avoid delays in processing your application.
Top Tip
It seems obvious but read the forms carefully before you begin completing them including the instructions and guidance. Look up cross-references and most importantly, don't try to complete your application in a hurry. Most mistakes can be easily avoided if you take your time and read through your answers before you submit your application.
HSF Form 1
Section E - Regulated Business
Question 43 - Do not request a requirement here to not hold or control client money as this can be done at Question 54.
Section H – Compliance with our regulatory requirements
Question 53 – Firms that do mortgage and general insurance business but only hold client money for their mortgage business should cross 'f'. On the Supplementary Information Sheet they should advise us they do general insurance business but do not hold client money for this part of their business.
Question 54 - Of the firms that have told us they will not be holding client money, most of them will need a requirement to reflect this. The requirement prevents firms from holding client money and is consistent with the declaration that they do not hold client money. It is recorded on the public Register so that consumers can check whether firms are permitted to hold their money before they hand money over to them. Having the requirement on a firm's permission will also reduce the need for us to ensure that firms have systems and controls in place to comply with our client money rules.
Section I – Application Fees
Mistakes are occurring here because firms do not notice the '000*' outside the boxes. The result is they inflate their income by thousands of pounds. If your income is £500,000 you should complete the box with '500'. If you insert 500,000, your fee will be calculated on an income of £500million.
HSF Form 2
Section C – Arrangements and controlled functions
Question 24 - Think carefully about the roles individuals play in the firm before selecting which controlled functions they will need. Some examples of mistakes are:
- Sole traders are applying to be an approved person; they do not have to be an approved person unless they have other staff who are approved persons. But sole traders must still complete HSF Form 2 as a controller.
- Not applying for the Apportionment and Oversight function. With the exception of sole traders, every firm will need someone to carry out the Apportionment and Oversight function. This function should preferably be performed by the Chief Executive or an equivalent person.
- Firms are applying for individuals to have every controlled function. Most controlled functions do not apply to most firms. The application will be delayed while we establish which controlled functions are really needed.
If you need help understanding controlled functions and which ones you should apply for, click here. [link to Controlled functions]
This information is relevant to firms completing HSF 1 and 2. The forms and this information cannot be used after 14 January 2005.
Controlled Functions
Controlled functions are those jobs or responsibilities within a business that have a particular regulatory significance. Some examples are overseeing the firm's systems and controls and being responsible for compliance with our rules. There are 27 controlled functions and different functions are relevant to different businesses, depending on the particular regulated activities they do. The table below shows which controlled functions apply to firms carrying on mortgage and general insurance business. An x indicates controlled functions that do not apply.
Individuals holding a position of significant influence in a firm or, in the case of firms doing investment business, who deal with customers or their property, need to be approved by us (these individuals are called approved persons).
Not all controlled functions apply to all firms so you do not need to have individuals covering all controlled functions. And, where more than one controlled function does apply to a firm, a single individual can perform more than one controlled function. Some examples of how this works are:
Sole traders. A sole trader carrying on mortgage and/or general insurance business does not have to be an approved person unless he or she has other staff who are approved persons. In this case, he or she will need to apply for the sole trader function.
Introducer Appointed Representatives. No controlled functions apply so no need to apply for individuals to become approved persons.
Appointed Representative (primary intermediary). If a firm's principal business is mortgage or general insurance business and it becomes an appointed representative of an authorised firm, individuals performing any of the following governing functions will need to apply for the relevant function to them:
- Director function
- Non-executive director function
- Chief Executive function
- Partner function
- Director of an unincorporated association function
- Small friendly society function
- Sole trader function (remembering this does not apply unless the sole trader has other staff who are approved persons).
Appointed Representative (secondary insurance intermediary). A firm whose main business is not financial services (a secondary insurance intermediary) will only need to seek approval for one individual. That person should be a director (or equivalent) and perform one of the following governing functions:
- Director function
- Chief Executive function
- Partner function
- Director of unincorporated association function.
Secondary Insurance Intermediary. A firm applying for authorisation and whose main business is not financial services (for example a retailer) will need to seek approval for one individual to perform the apportionment and oversight function. No other controlled functions apply.
Primary Mortgage firms and Insurance intermediaries. As a minimum, firms will need to apply for individuals performing any of the governing functions and for one of those individuals to perform the apportionment and oversight function, preferably the chief executive or equivalent. If a firm has applied for a governing function, the individual is automatically able to perform any of the significant management or systems and controls functions. So, for example, there is no need for someone performing a director function to also apply for the finance function. Take a look at some of the typical firm scenarios below to help you understand which controlled functions to apply for.
For more information about controlled functions and becoming an approved person see:
- our factsheet Becoming an approved person (for an overview)
- Chapter 6 of our Guide to the FSA Handbook for Small Mortgage and Insurance Intermediaries (for more information about which controlled functions apply)
- Chapter 10 of the Supervision Manual of the FSA Handbook (for a description of each controlled function)
This information is relevant to firms applying for authorisation to do mortgage and general insurance business only and cannot be used after 14 January 2005.
