If you carry out mortgage and insurance mediation activities, you will need to provide the right information at the right time to comply with the Financial Services Authority’s (FSA) reporting rules.
Records must be kept to reflect accurately events that have taken place, and they must be reproduced in sufficient detail for a new pair of hands to interpret what the full picture of the situation was at a certain point in time. It is not sufficient to elaborate on your recollection of a particular situation.
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There is a simple rule here at blackandwhite.co.uk. We hammer home time and time again – ‘if it’s not written down, it did not happen’. Think about it – try proving what you said to your partner or your friend down the pub last night. Seriously though, the need to have the ability to prove what was agreed by whom and when, stretches back as far as the oldest case law, hundreds of years ago. You never know when you may need to call on the exact events in a transaction whether it was a verbal or written exchange.
You must be mindful of the fact of what we are doing here in our capacity as industry professionals – we are assisting clients, with infinitely different and complex situations, in choosing to take out legally binding contracts that is most appropriate for their specific circumstances and possibly the largest financial transaction they will make – ever. We play a serious and very important pivotal role in bringing this about.
Ask yourself – would you expect a solicitor to keep records of transactions between the firm and its customers? Sure you would, it’s a given. We are now the same ilk, we are regarded in the main as specialists, as are doctors, solicitors or accountants. We can congratulate ourselves on this standing. The industry has changed and will continue to clean up its act, better for all concerned, not just the FSA statutory objectives.
Not onerous
The record-keeping rules should not be viewed as onerous. Quite the contrary; accurate record-keeping aids the company in its corporate governance strategy and creates a platform for growth and business development. It is the cornerstone of any business. It demonstrates good corporate governance and will also assist greatly in complaints resolution, and marketing. All of the latter are greatly important to any business regardless of its size orientation.
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The FSA will, from time to time, require information from your records that will allow it to supervise your firm accurately, effectively and proportionally. Through accurate information, the FSA can monitor your adherence to the threshold conditions and specific rule requirements. It will also allow the FSA to spot trends within your firm and decide if it needs greater supervision – or not – as the case may be.
Taking this issue to principle level; having accurate records to hand will enable your firm to satisfy principle 11, as a minimum, but if you apply this to all of the principles you can see that record-keeping is required to satisfy all 11 of the principles. Let’s be practical about this; failure to meet a reporting deadline will instantly alert the FSA that your arrangements, systems and controls may not be up to scratch. That would normally prompt a visit from our friends at Canary Wharf – and quite possibly not a friendly visit.
Other organisations require accurate records too, Customs and Excise, the Department for Work and Pensions and, of course, the Financial Ombudsman Service. We have successfully defended complaints and addressed areas of concern through very accurate record-keeping, saving the company time and money and allowing it to develop its strategies. It also brings a speedy resolution to the complainant, which after all is their major concern. It’s also important to define the scope of records kept. Of course there is the usual paper trail but recording every phone conversation that is made is also very useful. These recordings can indeed help reduce the level of complaints as in the event of a complaint we can refer to the original recording of events. It’s amazing what customers think they said or think they were told – and what really happened.
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Archiving all e-mail activity is also a good idea. An e-mail is as good as a phone recording when it comes to verification of facts and its amazing how many times an e-mail trail can be used to unravel an error in understanding or resolve a complaint. This is particularly pertinent in your dealings with lenders, particularly verifying the exact dates when rates are changed or a product is marked for withdrawal.
The customer themselves can request that all records you keep in regards to your dealings with them are reproduced under an access request governed by the Data Protection Act. Miss this one and your record-keeping standards will be exposed as seriously deficient. If you lose your DPA licence, to the effect that your firm cannot retain data and keep records, how can your firm really hope to exist?
Fundamental rule
The fundamental rule on all record-keeping is to ensure your firm takes reasonable care to make and maintain adequate records of matters and dealings, including accounting, which are required under the regulatory system. Any record should be capable of being reproduced on a durable medium and in good time. In addition, your firm should have appropriate systems to fulfill its obligations of adequacy, security, accessibility and, of course, correct periods of retention.
All records should be kept ‘readily accessible’ for inspection – this could be within two working days of the request being made. The easiest form of record retention is electronic format; if this is your preferred medium then you must ensure that the record reflects the original information and that the documents cannot be altered accidentally or otherwise without authorisation, realistically not altered at all.
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Many are confused as to what records should be kept. Your firm should consider using a checklist to ensure accuracy, however a rough guide for instance would be:
- Financial Promotions
- Suitability of advice
- Training and Competence
Taking a tough stance
Record-keeping stretches through to every piece of paper you generate – you should draw up lists to ensure that case files retain required documents and this could include e-mail correspondence and case notes made on the case. If in doubt, keep it.
The FSA is taking a very tough stance on ‘Treating Customers Fairly’ (TCF). This is an issue where accurate record-keeping can be your savior. The FSA is particularly keen to ensure, for example, that non-conforming clients are indeed non-conforming, and they could not in any circumstance have qualified for a prime product. We use TriGold’s Compliance Shield function to bolster our cause here. Compliance Shield leaves a full audit trail of how we managed to narrow down our recommendation from our 4,000 mortgage products to a single solution. Clearly this information is key to ensuring that the client’s solution is specific to their circumstances and also that our sales adviser has followed the correct procedures.
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Additionally the FSA is keen to ensure that brokers have systems in place that effectively migrate a non-conforming client back to a prime product should the conduct of their non-conforming mortgage be satisfactory. This has the potential to a be a real banana skin in months come for two key reasons.
- The broker will need to demonstrate they have systems in place which constantly monitor the circumstances of their clients and ensuring the advice they gave remains appropriate.
- Lenders and brokers will need to start working together and that means sharing information. Accord has already started by sharing the annual mortgage statement with the introducing broker and also informing the introducer when the customer has missed more than two mortgage payments. Other lenders are sure to follow. It certainly wont be acceptable for either broker or lender to allow inertia to win out and result in a customer ending up on an unnecessarily expensive standard variable rate. Accurate record-keeping by both the lender and broker will be key to this strategy.
