FSA Warns over Broker and Packager Roles and Responsibilities
Ah well, the wheels of commerce have started to grind to their annual halt. I wonder how many times ‘Well, there’s no point starting it until after the holidays’ have been echoed around British offices.
On the news front, a story that caught my eye was one that in their monthly newsletter for mortgage advisors the FSA told intermediaries, who use packagers, to look at their procedures.
The FSA said it had visited nine brokers, six packagers and conducted a telephone survey with another twenty-five brokers. This exposed worrying findings into the relationship between mortgage brokers and packagers - where a number of advisers are relying entirely upon the product suggestions made by packagers without making any of their own checks.
The investigation found that approximately a quarter of brokers only sometimes checked the suitability of a product suggested by a packager for the customer. A smaller number of brokers never checked and relied entirely upon the product suggestions made by packagers.
The FSA also pointed out that that where brokers and packagers had contracts saying that it was the responsibility of the packager to give reasons why a product had been selected and if that advice was later found to be incorrect, it was the responsibility of the packager to compensate the end customer were wrong.
The FSA is warning that even if such an agreement has been drawn up, all regulatory obligations remain the responsibility of the broker and it would expect them to evidence the reasons why the product they recommended was suitable for their customer. Information provided to the broker by the packager can form part of that suitability assessment. In the case of non-compliant advice, any resulting regulatory action will be taken against the authorised broker, not the packager - even if that packager sourced the product.
With regards to giving out a Key Facts Illustrated (KFI) to customers, the FSA found that it was sometimes the broker who gave them to the customer and in other cases the packager. The FSA said regardless of who issues the KFI, it remains the responsibility of the authorised firm that is dealing directly with the customer to make sure the KFI is given to the customer at the right time.
