This extension includes insurers, investment firms, asset managers consumer credit firms and insurance and mortgage brokers. The regime will introduce a statutory duty for senior managers to take reasonable steps to prevent regulatory breaches by the firms in which they work.
The mortgage market is already steeped in rules, reviews, directives and macro-prudential controls from the Bank of England – the advent of a new regime which will usher in more governance adds to this list of regulations.
This week our panel of experts from the leading trade bodies in the mortgage industry give their opinions on the effects of the Senior Managers and Certification Regime on mortgage advice.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, believes mortgage intermediaries are already well placed to meet the requirements of the regime.
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), bids a cautious welcome to the proposed regime extension and believes shared standards make considerable sense.
Paul Broadhead, head of mortgage policy at the Building Societies Association, believes the changes will require firms to make substantial investments of their time, effort and training to make sure the regime is properly adhered to.
Robert Sinclair is the chief executive of the Association of Mortgage Intermediaries
The arrival of the regime for the wider mortgage market is a positive step forward. This delivers a level playing field with our lender partners, a principle that AMI has long argued should be a fundamental in the market. It delivers this through a more formal setup than that which currently exists around firms’ responsibilities and the accountabilities their principals have today.
I do not consider that intermediary firms will be challenged by the requirements to allocate specific responsibilities and certify that those who can impact consumers are fit and proper. There is nothing new here. Mortgage intermediary firms, since the crisis, have been exercising increasing diligence on both recruitment and regular vetting of their advisory staff.
In addition to this, all lenders require completed contracts to be in place before a firm is allowed on panel and able to place business. These contracts already impose responsibilities on firms and we have increasingly seen some lenders look in detail at the systems and controls in firms to ensure that their products are sold in a compliant way.
The need to certify might be new but the factors that underpin this are not. As Andrew Bailey, top man at the Prudential Regulation Authority (PRA), has been at pains to explain, those who see these changes as an unwelcome imposition of new standards do not understand what their roles and responsibilities are today. As firms who have the customer at the heart of their proposition, the vast majority of mortgage intermediary firms will have nothing to fear.
This announcement firmly puts the responsibility of employee appointments and their conduct with company principles. All parties should now leave firms to run their own businesses and respect this decision by government.
Peter Williams is executive director of the Intermediary Mortgage Lenders Association (IMLA)
The process is being staged with lenders having to comply by 7 March 2016 but being given till 7 March 2017 to complete the certification of existing staff. The Treasury accepts that the process ‘will be very challenging’ and the government and the financial services regulators plan to set a ‘stretching but realistic plan’ for implementation.
The government therefore intends that implementation of the newly extended regime should come into operation during 2018. This will allow the regulators to engage effectively with all affected stakeholders and consider in detail important issues such as proportionality and the lessons learned through the implementation of the Senior Managers and Certification Regime (SM&CR) for banking sector firms.
With understandable caution, IMLA welcomes these proposals albeit recognising the challenges it poses for all involved. A shared regime covering individuals as well as firms and covering brokers and lenders makes considerable sense. It is clear the proposals will replace the Approved Persons Regime in the Financial Services and Markets Act as the way in which the conduct of financial services professionals is regulated.
Any new regime will impact upon operational behaviours and induce a degree of caution, especially one which puts clear responsibilities in place. However, as has been clear from the advice review and other work around fraud the intermediated sector does need to have a stronger framework in place. This will be a considerable challenge to compliance departments but this is a sensible step forward and assuming we can work together to create a sensible new regime then the outcomes should be positive for consumers and the industry.
Paul Broadhead is head of mortgage policy at the Building Societies Association
The amendments proposed by the government to the Bank of England and Financial Services Bill will, if passed by the Lords and the Commons, see all three parts of the new accountability regime applied to other regulated financial services firms by 2018/19: the Senior Managers Regime, Certification Regime and Conduct Rules.
In many ways this move makes perfect sense. In the mortgage market for example intermediaries are playing an increasingly important role. The aim is for a seamless, excellent customer experience, so having staff under the same accountability and conduct regime looks to be sensible.
In addition this move does away with the risks inherent in the previous twin-track approach. How can it ever have made sense to have a situation where a mortgage adviser in a lender is more highly regulated than the equivalent role in a mortgage broker?
That said I can totally understand that the news will not be universally popular. Many firms will probably find though that elements of the regime – especially in relation to conduct – are already well covered under their current compliance. And, by the time the news rules have to be implemented, lenders will have blazed the trail and may be in a position to share their experiences plus some of the more tangible elements like the joys of responsibility mapping.
I don’t anticipate that this move will affect underwriting decisions, but what it will need is a substantial investment of time, effort and training to implement.
