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Advisers fall down on status disclosure

  • 17/09/2001
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Failure among advisers to disclose whether they are a tied agent or not is the most common reason fo...

Failure among advisers to disclose whether they are a tied agent or not is the most common reason for failure to comply with the Mortgage Code, according to the Mortgage Code Compliance Board (MCCB).

The Code states that advisers must disclose to customers whether they are giving advice on behalf of lenders or on an independent basis, yet many are failing compliance visits because of failure to do so.

Brad Baker, head of communications at the MCCB, said advisers need to make their position clear to customers as soon as possible.

‘The Code has very specific wording about status disclosure. Put simply, advisers have to state whether they are acting on behalf of the lender or the customer. Many advisers do not make that distinction clear. We recommend they make their status known in their terms of business or verbally on the first meeting with clients,’ he said.

But Andy Smart, compliance officer of Zurich’s advice network, said it has not found status disclosure a problem among its members.

‘I do find it surprising that status disclosure is the most common failure, as requirements set out in the Mortgage Code are very clear. We are responsible for our members when it comes to compliance matters, so we insist status is disclosed in terms of business. Although we have not had this particular problem with members, we do have procedures in place such as mystery shopping, to ensure members do comply with the Code.’

Legal & General’s Mortgage Club implements similar procedures to ensure its members disclose their status to customers. ‘We take compliance issues very seriously and, in addition to other measures, we have field review officers visiting members on site. However, we have not experienced any particular problems in this area of compliance,’ said Graham Davey, director of Legal & General’s Mortgage Club.

According to Baker, other areas that advisers tend to slip up on are information provision and making clear that they have an internal complaints process. A draft terms of business letter, which includes status disclosure, is available for advisers to download from the MCCB’s website.


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