The new MCCB registration rules present greater demands and requirements – and not before time.
Comparing the May 2000 document with this year's new requirements, six pages of rules have become 12 pages and seven “definitions” have been expanded to 14. Has the MCCB deliberately doubled the content, with some masochistic mathematical consistency? No. It is doing absolutely what it needs to.
When I wrote in such articles last year that it was time to raise the drawbridge and make the mortgage advisory market much tougher to enter, I received several vociferous and critical letters from brokers objecting to my call for tougher rules.
But for me, increasing regulatory requirements and a resultant raising of standards is what the market needs.
I believe that the MCCB scored a huge hit in hiring experienced industry executives such as Sue Scott, formerly with Woolwich, and Richard Fox from Prudential Group who are now legal & policy director and compliance director of MCCB respectively. It is thanks to such depth of industry and regulatory experience that real results are now being seen. But improvements in standards go hand in hand with increased regulation.
Here are some of the key changes contained in the new 14-page “registration rules” document and an overview of the timetable.
This year's MCCB application form now captures additional business information from firms, so be prepared to provide more detail. This will obviously enable more risk-based compliance monitoring of firms.
There is a small increase in fees which is described as a result of increased “monitoring, investigatory and disciplinary activity”.
The new rules from May 1, 2001 have been amended principally to include the fitness and competence requirements for registered mortgage advisers and the fitness and propriety requirements for firms. There is a new rule which means that MCCB registration automatically lapses if either PI insurance or a Consumer Credit Licence is not held.
You should ensure that your CCL is valid and that PI does not lapse. Any subsequent reinstatement of your registration with MCCB is entirely at its discretion after a deregistration of this nature.
Fitness and propriety rules are effective from May 1, 2001. The only firms who will completely escape MCCB fitness and propriety rules are those already authorised by the FSA.
But even these will have to demonstrate that their mortgage work is managed and closely linked with the firm's financial services operations.
All firms will, from May 1, 2001, have to meet the fitness and competence requirements for registered mortgage advisers, including monitoring exam progress against the December 2002 deadline.
From September 2001, firms must establish “competence levels” and introduce formal supervision procedures for their registered mortgage advisers.
At end of December 2001, the F&P rules are fully implemented and all registered mortgage advisers – new and old – have to meet the requirements.
Key aspects of competence requirements
Individuals in MCCB registered firm wishing to train to become registered mortgage advisers are to be known as trainee advisers. Much reference is made in the rules to “competence” and “competent”.
Rather than a Draconian prescriptive approach, you may find some comfort in the fact that you specify your own competence level “based upon the scale and nature of the mortgage business undertaken” by your firm.
MCCB provides guidance notes which give helpful information on the main training and competence requirements, including:
Establish the applicant's skills, knowledge and experience and their understanding of regulations and legislation. Assessment any training the applicant has received and verify examination passes.
Ensure it is relevant and up to date. A programme towards competence could include on-job training, attended interviews, review of cases, role plays, review of fact-finds, analysis of failed sales and complaints.
Unlike earlier PIA/Lautro rules, a minimum “hours per year” threshold of CPD activity is not essential.
Set internal benchmarks to be undertaken by registered mortgage advisers and trainee advisers relevant to the scale of your mortgage activity. Make and retain records which are applied in assessing continuing competence.
Supervision and monitoring
Establish a system of supervision and monitoring competence which could include ratio of sales to offers or completions, product confirmation letters acceptance rates following supervisor checks and administration error rates.
Intermediaries need to take the registration rules as seriously as the code itself, as they are a fundamental part of the registered firm's obligations. If in doubt, call the MCCB helpline or take expert compliance advice.
Be confident that you are competent.