PMN believes that many networks who have paid lip service to the statutory requirements imposed on them as Principals under the new regulatory regime of the Financial Services Authority will be denied the ability to function properly, or in some circumstances, at all.
The regulator is currently about to embark on a major round of network assessments known as ‘arrow visits’. These are the critical part of the authorisation process. A key component of this exercise is to visit a ‘mortgage network and interview key decision makers and general members of staff.
“The goal of the FSA is to weed out those networks that are not capable of punching their weight in the new regulatory world,” explained PMN managing director Dale Knight. “When the FSA visits a network their very existence is in the balance.
“If a network is well prepared and has a strong, professional and reliable professional compliance regime in place then I am sure that they will satisfy all of the FSA’s needs. If, however, a network has paid scant regard to their compliance obligations – in terms of the quality of the personnel they have recruited to lead their compliance operation and the strength and depth of their infrastructure – then they are going to have some problems with the FSA.
“Just how significant these problems will be depends on the scale of the problems that the FSA arrow team uncover. Any problems that are found will certainly lead to a network being forced to meet strict new criteria before they are allowed to formally open their door to AR business. It’s my opinion that at least 30 per cent of all networks will encounter significant problems with the FSA and will be unable to trade on Mortgage Day.”
Detailed information about the soon to be launched FSA arrow visits is not enjoying a wide circulation. However, PMN has learned that the visits are required to establish:
< Whether a network is capable of managing the compliance needs of its members.
< Whether key individuals are capable of making on-the-spot decisions that support the FSA’s decision to award Principal status.
Added Dale Knight: “We are not looking to scaremonger. By sharing the information we have at our disposal we are trying to ensure that the network community is better prepared – and therefore able to meet the standards and criteria set by the FSA.
“The next couple of months are going to be a testing time for all parties. And the more we can do collectively to ensure that we meet the required standards has to bode well for the thousands of advisers who are eager to become Appointed Representatives.”
Kevin Farrell, one of the UK’s leading mortgage compliance experts and a partner of RSM Robson Rhodes, a major UK-based compliance consultancy, echoes Dale Knight’s comments. “Statutory regulation is a real business enabler. But it can also hinder those businesses that haven’t taken regulation seriously – and I believe a number of mortgage networks will undoubtedly fall into this category.
“Mortgage networks will face a stern grilling from the FSA when they receive their arrow visits. And quite right too! The FSA has to be sure that a network can carry out its regulatory obligations. The only way this can be assessed is by putting directors and senior managers on the spot. Those that don’t meet the desired standards are given a chance to prove themselves again to the FSA – but not without safeguards being put in place.”
RSM Robson Rhodes is a strategic partner of PMN. It has developed the MoRe compliance system, one of the leading systems of its kind in the UK mortgage industry, which PMN is making available to its entire AR membership.
