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A regular regulation update

  • 31/01/2003
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The FSA has been in regulatory overdrive recently and although the paperwork looks daunting, help is at hand in the form of newsletters

While the Christmas break gave mortgage advisers a chance to get away from it all, this was not the case for the Financial Services Authority (FSA) as the publications and consultation papers issued by the regulator seemed to go into overdrive.

During December 2002 Consultation Papers 159 and 160 were issued, and now a Handbook Development Special Edition has been issued. With so much information being produced, this handbook provides an invaluable precis of the latest papers.

Many advisers will be unfamiliar with the FSA, its language, or indeed how it regulates firms. This is partly the reason the Handbook Development Newsletter has also been released.

Although FSA jargon abounds, it is all explained as it is meant to be an introduction to firms who will be seeking FSA authorisation in 2004. It is also mercifully short, only 11 pages, and well worth reading. The full text can be downloaded from However, this update contains a brief synopsis.

To start at the beginning, the Handbook is the FSA’s book of rules and guidance that extends to 15 large A4 ring binders. It is already some 9,500 pages long and still growing, and if this was to adorn an adviser’s office then around six feet of shelf space is required. Thankfully not all of it applies to mortgage or general insurance firms. The Handbook Development Newsletters summarise changes within the Handbook, and this one, aimed at new readers, explains some of the language and purposes of different papers.

Discussion Papers (DPs) ‘ papers that are circulated to firms about issues facing the FSA and the options available. The regulator seeks feedback and ideas from market practitioners.

Consultation Papers (CPs) ‘ following a DP there will always be a CP setting out the FSA’s proposals, sometimes draft rules, and seeking market response to specific questions. The FSA is bound by the Financial Services and Markets Act (FSMA) 2000 to consult. The responses to a CP can change some of the FSA’s proposals.

CP Feedback ‘ once the FSA has collated all the responses to a CP it will issue a paper summarising the feedback and its conclusions and proposals. Draft Text and then Made Text will follow.

RMs ‘ a relatively new pair of letters describing a paper that addresses the retail market. Any paper with the word ‘directive’ in it is a paper that emanates from Brussels, for example: Insurance Mediation Directive (IMD) and Distance Marketing Directive (DMD).

CPs, DPs and RMs have a specific number and title for reference purposes.

CPs and DPs will be accompanied by a newsletter that is an executive summary. This is useful for busy advisers who only have time for an overview with no detail, unless it is of specific interest to them.

This particular edition contains a publication timetable for new papers that stretches forward to July 2003. The penultimate page is a ‘roadmap’ or decision tree to help readers identify the CP most relevant to their business. As most readers of Mortgage Solutions are predominantly mortgage intermediaries who handle some aspect of general insurance as well, there are some useful papers to note that will be discussed in the first half of 2003. Briefly:

• General insurance firms who intend to become FSA authorised, but without any agents or sub-agents ‘ CP160, RM5 and RM6.

• General insurance firms who intend to become directly authorised and appoint agents ‘ CP159, CP160, RM5 and RM6.

• Firms who do not intend to become directly authorised, but do intend to become the agent of another firm ‘ CP159.

NB: CP159 and CP160 were published in December 2002, RM5 is due in January 2003 and RM6 is due during the second half of 2003.

I hope this update has not proven to be too difficult to read, more of a welcome back to 2003, a year of preparation for regulation.

By embracing the compliance culture and welcoming the opportunities that regulation will bring, we will all have a happy and prosperous 2003.

Ian Langley is a tutor with Incisive Training, a professional training organisation set up in conjunction with Mortgage Solutions to help mortgage advisers to pass the MAQ qualification. He is also a director of IFAct Mortgage Framework, which specialises in compliance solutions for the mortgage industry and is part of the IFAct Group of Companies.


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