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FSA will not apply RDR to mortgage market

As part of its mortgage market review, published today, the regulator says it has not identified a need for an RDR read-across.

It says QCF level four qualifications, which will be a minimum requirement for investment advisers, are not necessary in the mortgage space.

The FSA says: “First, we have found no evidence to suggest lack of training and competence is a significant issue in the mortgage market. Second, in terms of the level of competence required by advisers, the mortgage market is much simpler than the market for retail investments.

“The characteristics of mortgages can be compared in advance and do not rely to the same degree on inherently uncertain judgments about the relative rates of return and risks from investing in different assets.”

Adviser charging will not transfer across to mortgages under the FSA’s proposals. It says it is sufficient to address the incentives of lenders to lend responsibly and to restrict mortgage products which “create material risks to our statutory objectives”.

However the FSA is proposing to extend the approved persons regime to mortgage intermediaries, which will see them registered with the FSA, and to increase professional standards in the sector.

It states: “Principally, the individual registration of advisers by the professional standards board, which would provide a public record of all authorised mortgage intermediaries, would limit the ability of individuals to ‘hide’ from regulatory penalties. It would also give us the ability to track individuals throughout the industry.

“We also see merit in applying a code of ethics, and also firm-led initiatives on continuing professional development. Our views on these issues will depend on the shape decided for the PSB later this year.”

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