September 2016 – Introducing standards

With the introduction and upcoming expansion of the Senior Managers’ Regime, and diminishing of direct supervision, there is an increasing need to move towards self-regulation.  Firms will need to ensure responsibilities are clearly allocated and as the consequences for misconduct will be higher, there will no doubt be a strengthening of processes.

One area which will require focus is the relationship between a firm and its various partners, particularly introducers.  The regulator has highlighted concerns around firms’ due diligence of unauthorised entities.  Introducers are excluded from authorisation if they don’t receive any of the money paid by the borrower (excluding commission) and they disclose certain information prior to the introduction.  If an introducer carries out any regulated activity then they need to be directly authorised or an appointed representative of an authorised principal (an introducer appointed representative only being relevant to general insurance).  In any case, a firm must meet its regulatory requirements when accepting business from an introducer.  This includes carrying out adequate due diligence and having in place robust vetting procedures to ensure introductions have been sourced legitimately.  The regulator has seen the advice given by some firms being unduly influenced by the introducer and other firms delegate regulated activities to unauthorised introducers.

Whilst these concerns arose from a review of investment firms, the same responsibilities apply to mortgage intermediaries.  These responsibilities mean that the regulator is likely to hold firms, and from 2018 individuals, accountable for the actions of its introducers.

Aileen Lees
AMI Senior Policy Adviser