The Association of Mortgage Intermediaries (AMI) has obtained guidance from the Financial Services Authority (FSA) over certain aspects of packagers” activity and how regulation will affect them.
AMI sought to gain clarification on the fact that packagers arranged product exclusives, enhanced commission rates and often performed a product recommendation service, which seemed to mean their regulatory position could be deemed as “arranging”.
Following discussions with the FSA over this issue, Chris Cummings, director at AMI, said he received a statement from the FSA that said: “Our view is that, providing there is no direct contact between the broker packager and the consumer, none of these activities is likely to be a regulated activity in their own right. If this is the case, a broker packager would have to be undertaking other activities to trigger the regulated activity of arranging. Although a packager may technically arrange a product exclusive for an intermediary to offer, it will be the intermediary that is undertaking the regulated activity of ‘arranging’ for the consumer to enter into the regulated mortgage contract.
“The fact that a product is “exclusive” does not alter the fact that it is still the intermediary arranging the mortgage. We provide guidance at AUTH App 4.15.2G(3), where a packager provides information to an intermediary, rather than direct to a consumer. That guidance makes the point that a packager in these circumstances is likely to be too remote to be bringing about the particular mortgage transaction and that consumers will not participate in the arrangements made by the packager.
“Obviously, any broker packager must make a judgement about the extent of its activities, and assess whether it is undertaking a regulated activity. Such firms should take legal advice if unsure.”
A spokeswoman for the FSA stressed: “Whether packagers need to be regulated will depend on precisely what activities they are doing. With firms” activities varying considerably, what might be appropriate to one will not apply to the next. We are working towards a frequently asked question list which we will put up on our website in due course.”