Chris Cummings reminds firms that April is the first month of statutory regulatory reporting and looks at what need to be done
What does April mean to you? The start of spring? Lighter days and the feeling that things are getting better? Well yes – and if you are in IT, a warm sense that you will have lots to do – and the opportunity to ask for an even bigger budget.
My heart goes out to everyone in IT (please note the sarcasm in this sentence), who, over the last year or so, have seen compliance over-shadow them in the “we must have the resources” stakes. April is your chance to get even. The onset of regulatory reporting means that firms have to consider their IT capabilities once again and make sure they are collecting the right data, in the right format, that can be used to produce the right kind of reporting. Deep joy indeed.
Data collection schedule
For all authorised firms, the data collection schedule for regulatory reporting began on 1 April, with the FSA requiring firms to submit the resulting reports on their activities from 1 July. The good news is that all of this will take place online. Compared with the paper-based system IFAs have had to endure, if it works properly, the new system should be much easier – from the second time round (well, I always believe IT never works first time round).
Business owners who count themselves techno-phobes may take comfort from the fact that, while perhaps complex and certainly unfamiliar, online reporting is infinitely more economic than the alternatives. By doing it this way firms are spared the potential expense of an army of returns processors at Canary Wharf.
Another note of comfort is that most firms with internet access should be able to complete the returns. So, there shouldn’t be any great need to dash out and buy higher spec PCs. Though broadband, for those without it, is in my view a must-have.
Under the integrated regulatory reporting (IRR) system, mortgage lenders and administrators submit quarterly reports online through the Mortgage Lending and Administration Return (MLAR). The vast majority of regulated mortgage intermediaries will be submitting the Retail Mediation Activities Return (RMAR) twice a year – though it will be quarterly for the larger firms.
‘Baseline monitoring’
The data provided by firms provides the foundation for the FSA’s ‘baseline monitoring’ approach to supervising the industry. From the resulting data pool the regulator will cross-reference the information with the aim of separating ‘boy racers’ from orderly traffic. So, while mystery shopping and speculative firm visits forms a minor component part of monitoring, most transgressions and compliance breaches will be identified electronically.
Cynics will doubt that baseline monitoring will succeed where other regulators have failed but unprecedented emphasis has nonetheless been placed on the reporting rules. The FSA principles for businesses bind firms to dealing with the regulator ‘in an open and cooperative way’ and this means making sure the returns are submitted accurately and on time.
Requirements
So what’s required? The RMAR form intermediaries will complete comprises ten sections covering the following aspects of a firms business. These returns must be completed and submitted within 30 business days of a firm’s year end, and cover:
A. Balance sheet: Details of a firm’s assets, liabilities, capital held.
B. Profit and loss: Details of commission earned and fees, revenue and expenditure.
C. Client money: How, where and why held.
D. Financial resources: Confirmation of capital adequacy and details of investment provisions.
E. PII self-certification: Indemnity limit and excess, insurer and renewal date.
F. Threshold conditions: Confirmation of adequate resources in relation to activities undertaken, changes to close links such as subsidiaries or parent companies, and details of approved persons and controllers.
G. Training and competence: Number of supervisors, advisers and qualifications held.
H. COB Data: Sources of business, types of advertising used, number of appointed representatives (ARs) and monitoring details.
I. Supplementary PSD: Details of general insurance business undertaken by the firm.
J. Data for fees: Fees information for FSA, FOS, FSCS. (Most firms regulated post-‘Mortgage Day’ will not be required to fill in this section for 2005-06.)
Orderly systems
I do hope that firms will not fail to take the reporting rules seriously, or submit overdue reports. To complete the form in the first place requires orderly systems and record-keeping and without this, any firm misguided enough to ‘test the system’ will be up against lender and provider product sales data. This will include detailed information on exactly what products have been sold, through which intermediary, and in what manner.
Finally, firms should also note that they will also be required to submit separate complaints returns using the same reporting schedule. All authorised firms must notify the FSA of the number of complaints received, resolved, or referred to the FOS or indeed where no complaints have been received. An example of the complaints return can be viewed at Annex 1R of DISP1 (see www.fsa.gov.uk/pubs/other/disp1_annex1r_form.pdf).
For full details on the FSA’s Mandatory Electronic Reporting (MER) scheme, and PS04/9 and 04/8 downloads, including template examples of the RMAR, see www.fsa.gov.uk/regulatory_reporting/ (browser pages 124 to 138). As always, those with the clearest view of the road ahead will have the most straightforward journey.
AMI, as always, is keeping members updated on what they need to do when. Our free helpdesk is already guiding members through the returns and what information they need to collect. If you are still struggling to keep up with regulation – or are spending most of your day worrying about it – you could simply be keeping the wrong company. Membership of AMI comes with many benefits – a clear steer through regulation is just one of them.
Chris Cummings is director of AMI
