Addressing those tricky problems

As many readers will know, in March this year the Financial Services Authority (FSA) took its first enforcement action against intermediaries for non-submission of the compulsory Retail Mediation Activities Report (RMAR) when it barred nine small firms from carrying out regulated business. The information submitted on RMARs is used, as is well known by the FSA, to fulfil its objective of ensuring fair and efficient markets and it clearly takes non-compliance on this matter very seriously. On the other hand, the regulator wants to help firms to comply – not just bar them when they don’t – and the FSA recently announced that it had produced tips and advice on its website, together with a wide variety of other helpful activities such as an e-learning package and roadshows.

The easiest route to these tips is by first entering ‘completing your RMAR’ into the main search engine of the FSA website – this will bring up a list of references. At the top of the list should be the newly published tips and advice, which you can then enter. These tips are not a step-by-step guide that explains how to complete the RMAR, and the ‘frequently asked questions’ (FAQs) section displays only areas where mistakes are being made or where firms are experiencing the greatest confusion. The FAQs include what a ‘qualified’ audit report means; what client money totals need to be entered, and clarification on regulatory capital. Following the recent audit exemption for small firms, there is a useful section of Q&As on completing section D1 that will be affected by the audit requirement changes. Some practical advice about completing the RMAR is offered: don’t leave it to the last minute; keep all your back-up paperwork; use an effective financial accounts system; and remember that there is ‘help’ text in each RMAR section. Senior management are also reminded that they bear the full responsibility for the information in their RMARs regardless of who compiled the report.

More RMAR information can be found in the ‘Small Firms’ section where the option of ‘Regulatory Reporting’ in both the ‘Mortgage’ and ‘General Insurance’ sections brings up a page entitled ‘RMAR help’, which contains links to a general introduction to Integrated Regulatory Reporting (IRR); some FAQs on IRR; the e-learning packages on RMAR and financial resources; and information on surgeries roadshows and workshops. There are also ‘Notes for completion of the RMAR’, which are in the ‘Forms’ section of the ‘FSA Library’, under supervision forms, chapter 16, annex 18BG, and contain details of what information is to be filled in and what the FSA will use it for.

Association of Mortgage Intermediaries (AMI) members have access to AMI factsheet number 23 (July 2005), which is a useful explanation of RMAR, in a simple Q&A format that covers all the background details and works through each section of the report. With all this help and guidance, everyone should find compiling and submitting their RMAR a lot easier – and we all know what will happen if this isn’t done.

Interest-only loans

Q1: Interest-only loans are considered by many to be high risk and of course lenders are required to remind borrowers each year that should have a repayment vehicle in place. This should protect the broker who made the original recommendation, should the borrower be slow to implement a repayment vehicle. Do you agree?

Bill answers: The requirement placed on lenders provides some protection for the adviser, but nothing like enough to rely upon, in my view. The issue here is really as much about client management/relationship by the adviser as what the lender might or might not do. If the borrower reaches the end of the mortgage term and has no ability to repay the debt, they are as much likely to blame the adviser as the lender. Neal Smith from The Whitechurch Network wrote expressing some sensible views on this subject recently, basically saying that the adviser would be held responsible under more than one heading, poor advice, poor client management and ‘Treating Customers Fairly’.

Online Financial Promotions

Q2: We are a directly authorised (DA) firm of mortgage and general insurance intermediaries. We have had a website for quite a while, which we believe is compliant. We also use a blogsite where we mainly add statements from national and/or trade press about topical issues or news. Should the blogsite be approved as a financial promotion the same as our website?

Bill answers: In a word yes. You are promoting your firm and the services you offer and any special offers, so it should be approved as a financial promotion the same as your website. I am sure the FSA would view a blogsite in the same way as a normal website.

Checking for compliance

Q3: My firm has a website which we believe is compliant with MCOB 3.We have a number of links to other sites, lenders, general insurance providers, solicitors and the like. How frequently do you think we should be checking that sites we are linking to provide us with compliant information?

Bill answers: Given the speed with which much of what we do changes, especially via the product providers, I would recommend a compliance review at least monthly, more frequently maybe for lender links than some others.

Bill Warren is director of The Complete Network. You can contact him at: [email protected]