the following are observations made and comments you may have heard about regulation and compliance.
“I’m from compliance – I’m here to help.”
There is a rumour out there that people in compliance really do want to help – but let’s not go tarring them all with the same brush…
“There’s compliance and then there’s sales.”
Separating sales from compliance is the first step towards breaking the rules.
“It’s okay – there are much worse companies out there than us.”
The regulator won’t measure you against anyone else. It’ll measure you against the rules that have been laid down. It’s interested in the risk you pose to the customer and to the industry.
“You’ll be able to find all the answers you need on the website/in the rulebook/in MCOB 3.”
Really? Have you ever been passed around a number of different FSA departments trying to get an answer to what should be a simple question? The reason you called was precisely because you couldn’t find the answers on the website/in the rulebook/in MCOB 3.
Notice on the FSA website: “We do not recommend that the rulebook be printed out.”
Did you know that if you printed out the entire FSA rulebook on A4 single-sided paper and stacked it up, it would be over nine-feet high? You see, there it goes again – always trying to be helpful.
“We don’t get any complaints.”
The definition of a complaint under the current regulatory regime is ‘any expression of dissatisfaction…’ Understandably, the regulator may find it difficult to believe that according to the regulatory definition your complaints log is completely blank.
“It wasn’t really a complaint…”
Check the definition above…
“I’ve been doing this job for years – it’s obvious I’m competent.”
Many of us have been driving for years. How many of us would pass a driving test today? Some of us would and some of us wouldn’t. When we reach the point in any activity where we are ‘unconsciously competent’ and we don’t have to think about what we are doing anymore, that’s the point at which errors creep in. We all benefit from review and feedback.
“We’ll just say that we do this but we’ll carry on doing it our own way.”
Beware of this approach – it won’t help you if you’ve been mystery shopped, for example, to say that you do one thing and do another in practice. It’s also very difficult to talk with confidence about something that you are only paying lip-service to.
“The advertising of second charges is not regulated.”
Although second-charge lending is not regulated, the advertising of it falls under the rules relating to qualifying Financial Promotions. Therefore the advertising of second-charge lending is regulated.
“Self-cert is a viable option if the customer thinks they can afford more than their income would normally support.”
Self-certification is for those people who are unable to substantiate all of their income in the normal way. If you grossly over-estimate your income, it’s pretty obvious that you may not be able to afford to pay the mortgage. The regulator is mystery shopping with a focus on this very subject and you must not be led into a situation where you are effectively party to fraud.
“We can always check with the regulator to see if it’s happy with the advert.”
The regulator tells us very clearly that it will not individually approve an advert prior to release. Interestingly of course it is able to individually disapprove an advert once it has been placed.
“We can just put an action plan in place if the FSA comes in.”
Choosing not to follow the rules and guidance laid down by the regulator is a bit like placing the future of your business into someone else’s hands. In doing this you are leaving what happens to you and to your firm entirely to chance. Bear in mind that during the last quarterly FSA review three firms were placed under enforcement. The honeymoon period is very definitely over. The regulator expects you to have been meeting the standards laid down from 31 October 2004.
“Compliance is dull.”
Myth, legend or statement of fact?
“Compliance people are dull.”
It’s not true. We believe in fact that Tom Cruise is in negotiations with MGM Studios to play the lead role as a compliance officer in a new film about a large mortgage broker. The film is called ‘Eyes neatly dotted’.
“It’s too time-consuming for a small mortgage broker to be directly authorised.”
Once the systems and processes are in place, the day-to-day management should not be too onerous. There is help available from the regulator in the form of factsheets and training workshops, outside organisations such as AMI and from external compliance consultancy providers.
“I don’t run any risks in my business.”
There are always risks in business. If you don’t identify them and manage them, sooner or later it’ll catch you out.
Comment about the regulator: “It can’t just come in here whenever it likes…”
It may not generally appear without notice but it can choose to do so.
“Regulation is bad news for business.”
Having clear systems and processes in place for your business which allow you to deal effectively with your customers cannot possibly be bad for business. How you choose to react to regulation may be.
“You must keep a suitability letter for advised mortgage sales.”
You must keep a record that explains why you have concluded that any personal recommendation given satisfies the suitability requirements. This record can be in any format that you like as long as the evidence is there in a durable medium.
“Mortgage intermediaries need permission to hold client money.”
Myth or legend? We think there has been enough debate about this one. If you need to know the answer it was clarified in an earlier edition of Mortgage Introducer.
We hope you have enjoyed our myths and legends. One last addition before we close. There is also no truth in the rumour that delicatessens in Canary Wharf sell large quantities of fava beans and a nice Chianti…
Trevor Quinn-Thomas is technical director at The Coaching Platform Ltd
Alison Young is training director at The Coaching Platform Ltd
