Money that advisers receive by way of commission relating to fee-based advice will fall outside the scope of the FSA’s client money rules. This arrangement mirrors the one already in force for financial advisers on their investment business and will run until a long-term solution is found before implementation of the Markets in Financial Instruments Directive (MiFID).
The Association of Mortgage Intermediaries (AMI) has warned mortgage brokers should be aware the arrangements proposed in MiFID will mean any firm indebted to its clients will be subject to the client money rules. The directive, which is expected to come into force in 2007, may affect the guidance outlined by the FSA.
Chris Cummings, director-general of AMI, said: “It is pleasing the FSA has taken this stance on client money. As written, the rules did not account for arrangements in the mortgage industry and it is right brokers can now benefit from this concession.”
AMI added that those firms which offer clients the opportunity to pay by way of a combination of client fees and procuration fees may also need to make use of this concession.
Mike Lord, head of investments, small firms division at the FSA, said: “In the run-up to depolarisation last year we decided it would be disproportionately burdensome for investment firms to apply the full force of the client money rules on commission money and the same principle applies for mortgage business.”
Mike Fitzgerald, sales director at Brentchase Financial Services, commented: “I am pleased the FSA has allowed the same concession to mortgage brokers that had been given to investment advisers. The improvements that have been made to the mortgage industry will allow the FSA to keep regulation to the minimum necessary.”
