The FSA anticipates that around 40,000 firms will carry on one or more of the regulated activities covered. Of these, an estimated 12,000 firms will provide or arrange mortgages.
CP197 indicates that the FSA will require regulated firms to submit six monthly reports of around 15 equivalent 'pages' electronically - for example, providing summary financial data, verification of threshold conditions, data on training and competence, conduct of business and complaints. The MCCB believes this requirement may result in small firms with a lack of resource or Internet access being severely over-burdened, with some firms potentially being forced out of the market.
Currently, the almost 160 lenders and around 12,000 intermediary firms registered with MCCB complete and submit registration renewal data once a year. Much of the form is pre-populated with information already held by MCCB. Firms are asked to confirm or amend the data as necessary.
The vast majority of registered intermediary firms employ less than five sales staff, with over 7,000 being sole traders. MCCB is therefore concerned that the majority of firms may not have the capacity to report such detailed information every six months and furthermore wonders whether the FSA will be able to analyse in a timely manner the huge volume of data which is submitted. MCCB therefore believes there is an argument for changing the
required frequency of returns to an annual basis.
The FSA also proposes strict deadlines on financial reporting - and firms will have to submit their reports within 30 working days of the six month deadline. The FSA will punish late submissions and, additionally, proposes to treat a report as not received where the method of submission is not in accordance with its requirements. MCCB is concerned that if 'electronic
only' submission of regulatory reports is implemented the around 20% of intermediary firms currently registered with MCCB who do not have Internet access will be unfairly disadvantaged by the new rule.
Luke March, Chief Executive, MCCB said:
"The FSA Mortgage Conduct of Business rules do not specify Internet access as an essential requirement, and firms do not necessarily need this facility to undertake their business or to provide sufficient data to their existing regulator. It therefore seems unfortunate that the FSA should effectively be creating an additional threshold condition through its proposed reporting
requirements, namely Internet access.
"Together with the disciplinary sanctions in place, and the time and cost pressures of reporting twice a year, I fear that many firms may be severely affected by this extra burden. If firms are forced to leave the market, this in turn may reduce competition and consumer choice in the intermediary sector."
