If an individual applies to join a mortgage broker network, it is a form of business partnership.
This means they pay regular membership fees which provides them with access to compliance support along with other help in running their business.
If an application to join a mortgage broker network is successful, they become an appointed representative (AR) and within the framework they still have their own customers.
Does the FCA Regulate Mortgage Networks?
Mortgage brokers who join a network do not require direct authorisation from the Financial Conduct Authority (FCA).
Instead, the FCA regulates the mortgage broker network.
This means that the network acts as the principal for the AR and is responsible for their regulated activities.
Under the FCA’s regulations, the mortgage broker network takes full responsibility for ensuring that an AR complies with the relevant FCA rules.
For their part, the AR has to understand and comply with the regulatory requirements for the type of business they conduct.
Therefore, their activity must fall within the scope of the mortgage network’s own regulated status.
The principal firm in this relationship has the duty to make proper and sufficient checks on an authorised representative to ensure that they are working within regulatory boundaries.
A mortgage broker network is responsible for:
- The products the AR sells or arranges
- The advice the AR gives to customers, and
- Ensuring that the AR treats customers fairly.
Under its fair treatment of customers’ principles, the FCA expects firms to work towards achieving certain consumer outcomes:
- Consumers should have confidence that they are dealing with firms that put fair treatment of customers at the core of their culture.
- The products and services consumers receive are designed to meet their needs.
- The firm provides consumers with clear information and keeps them informed before, during and after the point of sale.
- Any advice consumers receive is suitable and accounts for their circumstances.
- The products they are provided with perform as firms have led them to expect, and that the service associated with them meets expected standards too.
- Consumers do not face unreasonable barriers after a sale, should they wish to change product, switch their provider, make a claim or a complaint.
Where an AR is part of a mortgage network, the network must ensure that the broker is treating customers fairly.
Under the FCA regulatory rules, mortgage broker networks must be able to demonstrate consistent fair treatment of customers.
How Compliance Advice benefits a Mortgage Broker Network
Compliance support, benefits ARs who are part of mortgage networks but specialist compliance advice can also benefit the networks themselves.
Just as an independent, directly authorised mortgage broker would need to make sure their business is FCA-compliant, so a mortgage network must do the same.
Compliance can be complex, and the regulatory landscape for mortgage broker networks keeps shifting.
Because networks are ultimately responsible for their ARs, they must ensure that they are meeting key performance indicators.
Not only must they ensure this, but they must be able to demonstrate this through close and continuing monitoring of ARs.
By following the FCA’s regulations and meeting necessary requirements for compliance, mortgage networks can make sure of their own continuing appeal to people who wish to become mortgage brokers.
Compliance advice is, in this sense, twofold, benefitting both networks and ARs.
However, it has a clear third benefit too for the entire mortgage industry.
Successful networks and their brokers build trust with customers and do more business on the back of it.
Key Things Networks Should Look Out for When Complying With the FCA
The FCA has expectations of mortgage broker networks when it comes to how they monitor and control their representatives.
It is especially concerned that as networks grow, they can still maintain satisfactory standards, along with their cash flow.
Consequently, networks must be properly risk-aware, and be able to show this, when complying with the FCA.
Procedures are therefore important for controlling and monitoring a business.
Networks should have clear reporting structures, and an obvious demarcation of responsibilities. This will help with compliance monitoring.
Examples of compliance monitoring of ARs within a network can include:
- Observing sales and advice sessions between an AR’s staff and customers
- File reviews.
Risk management and identifying trends are also things that the FCA expects networks to carry out.
Therefore, to demonstrate their compliance, networks should:
- Gather, analyse and act on complaints data and
- Monitor sales of particular products, along with who is providing them.
The FCA will want evidence that a mortgage network is gathering a sufficient amount of suitable quality information for these purposes.
Mortgage networks are responsible for professional indemnity insurance and monitoring their ARs, in performance, professional conduct, financial stability and in meeting the FCA’s regulations.
All active UK financial service providers must ensure that the standing data the FCA holds about them on the FCA register is correct and up to date.
This is something they must do on an annual basis.
Support for Mortgage Broker Network Compliance
Compliance support helps take the pressure off mortgage networks, including help with drafting policies and procedures, advice on data protection and professional indemnity requirements, along with file checks and reviews.
For more information, please contact us.