FCA targets networks and firms increasing adviser numbers

FCA targets networks and firms increasing adviser numbers

 

The Financial Conduct Authority (FCA) said it will be contacting firms and networks which have grown rapidly to ensure they were still maintaining sufficient oversight.

And it is also examining firms which have multiple trading names to ensure they are not illegally offering regulated advice from unregulated organisations.

The regulator’s cautions came in its Dear CEO letter to intermediaries about the state of the mortgage advice market.

 

Growing firms and networks

The FCA has already made a point of discussing concerns around the operations of networks and their oversight of appointed representatives (ARs) in its annual perimeter report.

However, this time it has directly addressed mortgage advice networks, noting that firms should have appropriate oversight in place for all advisers, including any ARs.

“We will engage with those firms where we have identified concerns about whether the oversight in place is sufficient and there is risk of harm to consumers,” it said.

“Where firms increase their number of advisers and/or ARs we would expect to see a corresponding increase in resources to ensure that adequate systems and controls are maintained.

“Where we see significant growth in firms we will contact them to assess if the changes made to oversight arrangements are appropriate,” it added.

 

Multiple trading names

And the regulator warned firms that it expects “appropriate oversight of trading names”, noting that it will be investigating firms with a large number of trading names.

It emphasised that firms can use trading names and these should be added to the Financial Services Register.

However, a firm must not add a separate and independent unauthorised firm as a trading name and allow it to carry out a regulated activity without being authorised or being an AR.

“Firms or individuals who carry out regulated activities in their own right, without being authorised or being an AR, risk committing a criminal offence,” the FCA said.

The authorised firm may also be breaching FCA rules while customers may also not have Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS) protection.

The regulator continued: “Customers dealing with an AR or trading name must be clear who is providing the advice and who is ultimately responsible for that advice.

“We have seen firms in the portfolio with a large number of trading names, and we will be contacting some of these firms to understand their business models, how their trading names are used and the oversight in place.”