Paying for their mistakes

The FSA says it will consider a move to regulate individual brokers after the regulator refused to rule out making brokers subject to its Approved Persons regime.

As part of its crackdown on mortgage miscreants, the FSA said it was now appropriate to review its decision five years ago to exclude individual mortgage brokers from regulation.

A spokeswoman for the FSA emphasised that regulating individual brokers was just one of a number of options currently being considered, but confirmed that a cost benefit analysis would now be carried out.

According to the FSA, there are currently 3,264 firms for whom mortgage broking is their main business, with an additional 7,078 intermediary firms that specialise in other areas but deal with mortgages too.

Brokers may feel that they are not bothered about this because they know they are clean and doing the right thing so they are happy to be an approved person.

As far as integrity goes, they could be right. However, if this happens, fees will inevitably increase for all brokers. Ask yourself this, what is the driver for the FSA to consider taking such steps?

Yes, you've got it. Your peers, (well, some of them) have driven the FSA to consider such action. In effect then firms and individuals like you who operate in a compliant, honest and fair way could well end up paying for the mistakes of your less scrupulous colleagues.

The costs associated with implementing a regime where all individuals have to be authorised will be extremely expensive. The FSA will have to employ additional resource to deal with the authorisations process alone.

This is one reason that some parts of the industry believes it'll never happen. But what if it does? Can the FSA afford to take the risk? I think not and therefore the regulation of individual brokers may be just a matter of time.

Regulation of a few thousand firms is a vastly different task from monitoring each individual broker, but I believe that it is the only way for the industry to clean up its act.

Regulating the firms themselves is not enough – it is the individuals that are the loose cannons in my opinion. The only advisers that should be worried by the prospect are those that deliberately operate below the FSA's benchmark and there is no hiding place for this minority anymore.

Julie Alderson is director of MS2M

The views expressed in this article are those of its author and do not necessarily represent those of the company he represents, IFAonline or any other Incisive Media affiliated organisation.