Questions from Hell
Professional indemnity cover for SRB, FSA requirements on approved persons and fraud
by Bill Warren, managing director, Bill Warren Compliance LLP
Has the last month seen the like before? Politicians really getting involved in trying to understand the implications of the rdr, calling the trade bodies to task over the apparent strength of their defence of their members and the Financial Services authority being forced to defend its position? Wow. and good on the
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politicians for seeming to rattle a few cages - maybe a little late but demanding a debate in Parliament on the rdr is a positive and reassuring move. it may be too late in certain senses for the FSa to change but at least the main areas of issue and real concerns for firms should get well aired in public. While the intermediary
arena has always been suspicious of the cmL’s motives given they are representing
its recent statements in
I have recently set up a company within my existing group of businesses to try and
take advantage of what I perceive are the commercial advantages and the wider social opportunities within the now well-regulated sale and rent back (SRB) market. However as an advising and arranging firm we have really struggled to get competitive professional indemnity insurance (PII). Why is this the case?
You are certainly not the first person who has mentioned difficulties in obtaining PII cover to me recently. There does appear to be reluctance by some of the established PII providers to enter and/or remain in the SRB market. I am not entirely sure why this is apart from perhaps the obvious nervousness that it is a new area of regulated business, although it has now been FSA-regulated for over sixteen months. The FSA has been and remains very intrusive and intensive in its consideration of applications for permissions to operate in this market and rightly so given the history of this market and its widely-publicised approach to all applications across the financial services industry.
Many firms have received authorisation and they must have PII cover in place to do so. I believe there are two reasons for any
lenders,
relation to the implications of the mmr have certainly struck a chord both with the mortgage market itself but perhaps more importantly with the FSa, even if the reaction is to criticise the cmL as overreacting. to have a situation where a non- executive director of the FSa is attacking the cmL’s statements, which are backed with factual research, speaks volumes – many are now saying, good on michael coogan for speaking up. Without wishing to repeat the many words written and
reluctance on the part of PII insurers and they are recent claims experience in the property-related market and perhaps a belief that the SRB market isn’t as tightly regulated as they believe is required. Practical experience in the market says otherwise for sure. There are insurers prepared to offer competitive cover but you need to shop around more perhaps..
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The original date to commence registering for and obtaining applications for the new
approved persons requirements for mortgage firms - the CF10 and CF31categories - has come and gone I believe. What is happening and what should I be doing to prepare?
The FSA did state in PS10/9 that the forms needed would be on their website in September and that sole traders and single director corporate firms should register to obtain a CRB check in November and December 2010 to be sure of obtaining the report in time. Obviously these dates have been missed as was hinted they might be by the FSA and we wait for the FSA to make a formal comment.
At Mortgage Business Expo 2010 Sheila Nichol, FSA Director, commented that confirmation would be coming soon. I
20 mortgage introducer DECEMBER 2010
spoken on the subject of both the rdr and the mmr by those more knowledgeable and informed than i am, at long last the industry and its representatives are being listened to, at least by some more powerful than the FSa. there is a real danger
as most already know only too well of the FSa driving another large stake into the hopes and dreams of so many consumers aspiring to better themselves by owning a property maybe for the first time or to accommodate enlarged families.
suspect late November with a slightly delayed start date for completed applications perhaps April/May 2011 instead of 31st March. My advice would be to re-read the requirements within PS10/9 and start preparing now if you haven’t already.
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Much has been reported recently relating to fraud and anti-money laundering with several warnings to brokers to be on their guard. What are the actual requirements that a mortgage broker must comply with?
A very topical question and one that many firms struggle to know what else they should do. The regulatory requirements are set out in the FSA handbook section SYSC 6.3 which basically states a regulated firm must have adequate systems and controls in place to prevent it from being used for financial crime. This also reminds firms that they must be aware of and comply with the Terrorism Act, the Proceeds of Crime Act and the published Money Laundering regulations. The responsibility is with the firm’s owners/directors/managers to deliver compliance and many use online IT systems such as the Veriphy System to protect themselves.
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