Mortgage Advisers

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1. Anyone for a Christmas quiz?
2. TCF – The End at Last?
3. “Consumers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect”
4. Does your platform need extending?
5. FSA themed visits – financial crime
6. Bogus FSA & FOS communications
7. Mortgage fraud
8. FSA steps up censure of mortgage brokers
9. Key rules for mortgage and home reversion brokers

Ladies & Gentlemen

Please find enclosed the latest compliance and industry news.

As usual, sit back and enjoy!

Kind Regards

ateb consultants

Which article applies to me?
Please use the following table to decide which article applies to you, if any:

	1	2	3	4	5	6	7	8	9
Directors/Partners
Compliance / A&O Function
Advisers & Trainees
T&C Supervisor
Back Office

 

1. Anyone for a Christmas quiz?

Article Removed

Ateb view:

Action required by you:

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2. TCF – The End at Last?

I’m afraid not.

Contrary to reports of its premature demise, TCF is alive and well. Furthermore, we can report that the FSA, like the Tin Man from the Wizard of Oz, does in fact have a heart - what other regulator would have had the decency to coincide Christmas with the deadline for implementing TCF?

By this month, you must be able to prove, through management behaviours, that you consistently treat customers fairly. It should now be part of your culture. Staff should be familiar with the 6 Outcomes and have a working knowledge of the FSA Principles. They should be able to discuss how the 6 outcomes impact on their day-to-day job – clear communication, service levels, suitability, etc.

Management should be able to demonstrate that TCF gap analyses, audits and action plans have been implemented and that management information (MI) includes TCF statistics that support your TCF initiatives. Importantly, you should be analysing your MI and looking for trends.

When the FSA refers to a TCF Culture, it expects the firm to demonstrate this through strong leadership and excellent controls, by incorporating TCF into business strategies, by ensuring that recruitment and T&C regimes attract and train the right people and by rewarding staff not purely on the basis of business generation, but also for compliant, ethical and professional business practices.

While the scope of your TCF initiatives will depend of the size and complexity of your firm, fundamentally, it applies to all firms, regardless of whether you have 1 or 100 staff.
If you can read the above with a confident air and swagger, then well done; if you cannot, then we suggest you review your TCF strategy.

Now, unlike the Tin Man who achieved his desired outcome i.e. he reached the end of the rainbow, this is not, unfortunately, the end of the story for you. TCF initiatives should be carried forward and we recommend that you build regular TCF reviews into your compliance schedule.

With regard to an FSA visit – please expect one.

Here are some quotes from an FSA statement issued in November:

“TCF remains central to the FSA's retail strategy, and firms are expected to meet the December 2008 deadline”.

“We will continue to challenge firms rigorously where there are issues and take decisive action where necessary”.

“The standard against which firms will be judged remains high, and the penalties for not complying remain tough.”

“The progress of small firms will be assessed via the three-year regional assessment programme ........ and aims to cover 11,300 retail intermediaries over three years”.

 

Ateb view:

TCF is alive and kicking

Action required by you:

If you haven’t reviewed your TCF progress for a while, now might be a good time.

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3. “Consumers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect”

Do you recognise this quote?

Give yourself some brownie points and an extra half glass of mulled wine if you recognised it as TCF Outcome number 5.

We think that this is probably the most important outcome because it encapsulates the TCF issue for smaller firms – are clients getting what they expect?

Ask yourself some questions, for example:

• When they become clients of yours, do they understand what level of service they can expect?
• Are they expecting you to regularly review their investments?
• When they come to make a claim, could there be any unexpected problems (e.g. client not covered)?

Achieving this outcome is beneficial to both you and the client:

• they know what they’re getting;
• you reduce the risk of complaints.
  

 

Ateb view:

Clear communication is undoubtedly the key to achieving this outcome.

Action required by you:

We would recommend that you constantly review your documentation with this outcome in mind. Why not challenge your staff to come up with initiatives and improvements?

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4. Does your platform need extending?

The FSA published Policy Statement PS08/9 “Organisational systems and controls – are extending the common platform” in September. The provisions will come into force on 1st April 2009; this date has been extended from the original proposed date of 1st October 2008.

This article is mainly applicable to home finance and insurance intermediaries together with those investment firms not already subject to the MiFID rules. Most other firms are already caught by these “Common Platform” requirements.

The Common Platform was first seen as part of the arrangements made to implement the MiFID & CRD Directives. The FSA has confirmed that it will extend the “Common Platform provisions” to nearly all firms not already subject to them. The provisions concern the organisational and systems and controls requirements in the common platform (by which is meant Chapters 4-10 of the Senior Management Arrangements, Systems and Controls sourcebook [SYSC]).

The common platform covers areas including compliance, business continuity, risk control, outsourcing and conflicts of interest:

General Organisational Requirements
The firm must have robust governance arrangements including clear organisational structure and reporting lines, effective systems for the identification and management of risks and appropriate administrative, accounting and information processing systems. The firm must also have experienced and reputable management and appropriate internal management practices and allocation of responsibilities.

Employees, Agents and Other Relevant Persons
Personnel employed by the firm must have appropriate skills, knowledge and expertise to carry out the functions allocated to them.

Compliance (including Internal Audit) and Financial Crime
The firm must have and maintain appropriate policies and procedures to enable the firm to comply with its regulatory responsibilities. Where appropriate to the nature and scale of the firm’s activities, an independent internal audit function must be maintained. The firm must also establish and maintain appropriate systems and controls to enable it to identify and manage money laundering and other financial crime risks.

Risk Control
The firm must establish and maintain adequate risk management policies and procedures that identify the risks to the firm’s activities and, as appropriate, establish the level of risk the firm is prepared to tolerate.

Outsourcing
Where appropriate, the firm must ensure that it takes appropriate measures to avoid undue additional operational risks arising through any outsourcing arrangements. Outsourcing will not be undertaken where this affects materially the firm’s internal controls and prevents the FSA from monitoring the firm’s compliance with its regulatory obligations.

Conflicts of Interest
The firm must have appropriate systems to identify and manage conflicts of interest between the firm (including its staff and, if any, it’s appointed representatives) and a client or between one client and another client.

The FSA confirmed that, with certain exceptions on areas such as outsourcing and managing conflicts of interest which will be subject to new provisions, firms complying with the existing provisions in SYSC 2 and 3 now will not need to change their behaviour when moving to the common platform.

 

Ateb view:

We would like to think that most firms will already be complying with the majority of these requirements, but there is likely to be some work required (see below).

Action required by you:

Firms will need to review their existing senior management arrangements, systems & controls to assess their adequacy for the common platform requirements and consider also whether any changes are needed to cope with the further specific provisions on outsourcing and conflicts of interest.

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5. FSA themed visits – financial crime

The FSA is undertaking financial crime themed visits to about 200 advisory firms, big and small.

Although we accept that General Insurance & Mortgage Firms are not subject to the FSA SYSC detailed money laundering rules and Money Laundering Regulations 2007, they are subject to Proceeds of Crime Act 2002 (POCA), Terrorism Act 2000, the Anti-terrorism, Crime and Security Act 2001 and the FSA SYSC (General requirements).

We, therefore, think the following information is useful to ALL advisory firms, so please take note:

Here is the gist of what takes place and what you should be aware of:

• 3 hour interview
• No file checks
• Request for pre-visit information includes financial crime procedures, Money Laundering Officer’s Report (investment firms only) and pre-visit questionnaire
• They also wanted to see Anti-money laundering verification procedures
  Questions centred on client data security and fraud potential
• They asked whether the firm had a fraud policy, but were not too concerned where the answer was ‘No’ (we haven’t seen the report yet though)
• They were interested to know whether TCF reviews and gap analyses included customer data security
• Training – is financial crime and related company procedures included in induction and ongoing staff training?
• Do you have a confidential waste policy / procedure?
• Do you have a clear desk policy, lockable cabinets, etc?
• Who has access to the offices?
• What do you do with old computers?
• Are there security checks undertaken when clients request sensitive information over the phone?

Finally, the FSA has recently, for the first time, fined a firm and its money laundering reporting officer for not having adequate anti-money laundering systems and controls.

Ateb view:

The potential for financial crime exists for small and large companies, so you need to be vigilant. You could be exposed if a financial crime arose out of your lack of internal control or inadequate procedures.

Action required by you:

Consider these comments carefully and decide whether you need to take further action. You may wish to talk to ATEB or click here which provides more general information.

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6. Bogus FSA & FOS communications

The catch
The FSA are aware of a number of bogus communications claiming to be from the Financial Services Authority (FSA) or the Financial Ombudsman Service (FOS) – which ask the recipient for personal information or money.

The FSA warns - Don't respond!
These bogus communications are often in the form of emails or letters and they sometimes use the name of current or former employees. They are likely to be linked to organised fraud and they strongly advise that you do not respond to them in any way

Protect yourself
If you are in any doubt about the authenticity of a communication from the FSA or FOS, whether that is a letter, email or other form, please contact one of the relevant telephone numbers below:

For FSA-related communications:
Authorised firms in the UK – 0845 606 9966 (call rates may vary)

For FOS-related communications:
0845 080 1800 (call rates may vary). For media enquiries please see the FOS news update in Related links.

Ateb view:

If firms haven’t got enough to consider with potential FSA communications, we now have to take into account they could be Bogus??

Action required by you:

Be on your guard and remember that the FSA would never call or email you for personal data.

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7. Mortgage fraud

Following on from the related article in our last newsletter, the FSA has now published a fact sheet to remind mortgage brokers of their responsibilities to minimise the potential for mortgage fraud.

You can find this fact sheet here.

Ateb view:

You should be aware of your responsibilities and what to do if you suspect fraud.

Action required by you:

We recommend you read the fact sheet.

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8. FSA steps up censure of mortgage brokers

The FSA is sharpening its sword and more firms are in line for censure. One broker in Bournemouth was recently fined £24,000.

This case is the first of several enforcement cases to arise from a thematic project looking into the quality of advice processes in mortgage brokers undertaken by the FSA in 2008.

The firm in question failed to ensure that it made and retained adequate records of its customers’ personal and financial information in a number of key areas of the business. Consequently, the firm was unable to demonstrate that the advice given to customers was suitable.

The firm also employed inadequate file checking systems whereby sales advisers and mortgage processors would check each file for the existence of requisite documentation, not the quality of its completion. Directors would then check only a sample of files and did not do so on a regular or adequate basis. There was no adequate system in place for directors to record that files had been reviewed.

Ateb view:

We do not want to scaremonger. Indeed, the failings here are blatant and the firm was rightly fined. However, all indications point towards further sharpening of the knife.

Action required by you:

For more information on the expected standards, please see our article on the ‘Quality of Advice Findings’ in our last newsletter.

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9. Key rules for mortgage and home reversion brokers

Did you know that there is a document available on the FSA website that summarises (if 52 pages can be considered a summary) the key rules for both conventional mortgages and home reversion schemes.

It highlights some of the key issues that brokers face, for example, suitability standards and assessing affordability.

You can find it here.

Ateb view:

This is a useful document that can be used for training purposes.

Action required by you:

We strongly recommend that you read it.

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Important Note:

The ATEB Newsletter is intended to provide general guidance on areas of compliance and T&C; however it is not a replacement for the main Rules and Guidance contained within the FSA Handbook. We welcome all feedback. If you have any feedback or questions relating to any articles then please direct them to your local ATEB consultant or the newsletter editor Steve Bailey email steve@atebconsulting.co.uk Unless you have consulted specifically (as part of a regular visit) with ATEB on a particular issue then ATEB Consulting accept no liability for any actions taken based on the information contained solely within the newsletter.

Contact Us:

Ateb Consulting
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29 Nedderton Village
Northumberland
NE22 6AX

T: (01670) 822984
M: (07703) 576951
E: steve@atebconsulting.co.uk
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