The Future of Regulation & You

 

THE FUTURE OF REGULATION AND YOU

A Heads Up for Clients by David Payne, Mortgagecoply.com ltd

You may have seen from the somewhat limited coverage in the trade press that there is quite a bit going on in the world of regulation at the moment and planned over the course of the next year or so. The purpose of this document is to provide you with a Heads Up on it so that you can start to prepare.

The main issues that we need to be thinking about right now are:-

1.      Legal cutover – the term used by the FSA to explain the hand over of responsibility by the FSA to the Financial Conduct Authority when it comes into being on 1st April this year.

2.      The Mortgage Market Review(MMR) and the planned changes that are to take place with effect from 26^th April 2014. This may be next year but action is expected of you as regulated firms, right now.

3.      Your Consumer Credit License. The FSA take on responsibility for the Consumer Credit Licensing from 1^st April 2014. This means that there are changes that affect your firm directly and, even if the CCL is for 5 years or not and even if you have paid a so called  lifetime fee when you renewed your license last time, you will have to do something about the changes.

Finally by way of an advance heads up, activity in European Legislation may well have an impact on  regulated loans in the UK and one particular impact that may arise is that Buy to Let mortgages could come within the remit of the Financial Conduct Authority as it will be  from 1^st April. It is unlikely that this will occur before 2016 but there is a distinct and not necessarily remote probability that it will occur.

Legal Cutover

Although this has a direct bearing on who your regulator is and therefore the manner and impact of involvement with your firm, it is difficult to determine the extent of this at this point in time. We have already heard that the FCA intends to get involved with firms on a regular basis, albeit most likely on a remote (internet or telephone basis) and that it intends to work on thematic reviews. However, until they commence activity we cannot prepare for that. However, one immediate impact that we must be aware of is that with effect from the 1^st April next month, firms will be AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY and their letterheads, stationery and web pages , adverts etc, will have to make this statement. In point of fact we have a six month transitional window that allows firms until 30^th September 2013 to make sure that all their regulatory statements (referred to by me and others as GEN 4.3 statements as this is the source in the FSA Handbook)

So your first action is to change the word services to conduct in your regulatory statements as soon as possible from 1^st April 2013 and no later than 30^th  September 2013.

You should not that your Firm Reference Number or FRN will remain the same but if you call it your FSA Number then you will need to change this as well. It is not prescriptive so you could call it FCA number if you wanted (but not keep it as FSA Number) but my recommendation is that you call it what it is. Firm Reference Number or FRN.

So,  typical regulatory statements should read something along the lines of:

 “Full  Registered Firm Name is authorised and regulated by the Financial Conduct Authority. FRN 345678”

Or

“Full  Registered Firm Name is authorised and regulated by the Financial Conduct Authority for mortgage and non-investment insurance business. FRN 345678”

Or, if you have a trading name,

“Trading Name is a trading style of Full Registered Firm Name. Full Registered Firm Name  is authorised and regulated by the Financial Conduct Authority. FRN 345678”

Or,

“Trading Name is a trading style of Full Registered Firm Name. Full Registered Firm Name is authorised and regulated by the Financial Conduct Authority for mortgage and non-investment insurance business. FRN 345678”

 

The Mortgage Market Review

In January this year the FSA held a number of road shows to explain the MMR and its impact on firms. They did not necessarily make it clear to all at the time of the invite, that this was an important workshop and that it would form a part of their MMR Engagement Programme.

Many of you have been on the workshop and so have heard the details. You will therefore know that the next stage in the process will be some form of questionnaire that you will be given about how your firm is preparing for MMR. This questionnaire, which may be online or by telephone - I am not certain at the moment – will occur, according to the FSA in Quarter 2 this year. The FCA will then publish the results and run a second workshop in Quarter 3 this year – I think they refer to it as “Further firm MMR engagement and tailored workshops”. I think that this will be remedial work and I am sure that this is not necessarily a good thing for firms as it may mean that they are not doing what the FSA ( FCA) want. . In Quarter 1 2014, the FCA will reissue the Readiness Tracking Questionnaire and publish the results of that a few weeks later. MMR goes live 26^th April 2014.

Have  no doubt in all this that where firms cannot demonstrate satisfactory progress towards preparation, the FCA will exercise their authority, possibly with enforcements or variation of permission.

So, if you did attend the workshops, you should start to think about how MMR will affect you and wait for me to issue a proposed Preparation Plan which I hope to get out to subscribing clients later this week, or early next. If you didn’t attend the workshop, let me know on david.c.payne1@btinternet.com of through LinkedIn if you are on there, and I will send you a copy of the details that I have. Or even post to this blog if needs be...

 

Consumer Credit License

The FCA will become responsible for the authorisation and regulation of firms who undertake activity that falls within the Consumer Credit Act from 1^st April 2014. This means that if you wish to deal in consumer credit loans or second charges or indeed if you want to be  able to advise clients on whether to repay consumer credit regulated loans (which most of you do in some form or another) then you will need to apply for ‘Interim Authorisation’ for this  if you want ot be able to carry on these activities after 31^st March 2014. We don’t yet have full details yet but the document issued last week by the FSA referred to as ‘Autumn’ as the time when applications can be made and that there will be  a fee to pay ( as yet unspecified). I’ll make no comment about the fee aspect but I will point out that it doesn’t matter at the moment whether your license has 5 years to run or 12 months, you will still have to apply for authorisation. For existing firms I presume that the change will be by way of an extension to your existing permissions. Once approved, you will be able to continue with CCA activities from1^st April 2014. From 1^st April 2014 to 2016 an interim regime will operate. I think this broadly means that the same basic rules will apply as currently (allowing for FSA conduct o business and principles. I have not yet read in full the 6^th March issued document). From 2016 a new regime will be in place, no doubt we will hear more in the months and  years to come.

You have to take action on this one, too.

So, in autumn this year you will need to apply for interim permission to undertake Consumer Credit activities and pay a fee. I will build this into the MMR Preparation Plan and issue as set out above.

 

More documents to follow from me over the next few weeks, including:-

·        The FINANCIAL CONDUCT AUTHORITY – ADDITIONAL POWERS

·        MMR PREPARATION PLAN & GAP ANALYSIS

·        WHAT DOES THE MMR REALLY MEAN FOR MY FIRM?

·        THE CONSUMER CREDIT REGIME CHANGE