FCA Consultation on Unregulated Firms

FCA Consultation on Unregulated Firms

I see the FCA has announced a consultation period for a mission document on its strategy for unregulated firms. Ostensibly this is a good thing since as the agency itself commented the lines between regulated and unregulated business have blurred, although maybe it’s more a case of they have become more aware of the blurring recently rather than the grey area actually just arriving.

Unfortunately some past attempts to govern this problem have been spectacularly unsuccessful, expensive and misunderstood. I refer of course to the “Introducer AR” listing of the FCA register. This has resulted in a category of unregulated firms now being given the appearance of a qualified regulated business with the added credence of a listing on the FCA register.

Confusion doesn’t seem to go far enough to cover the current situation where an unregulated estate agency for example will appear regulated on the register, even though they have no permissions to carry out financial services business and have no responsibility for the introductions they carry out. Has anyone ever spoken to a single member of the public outside of financial services who knows what a registered introducer is?  I suspect not and worse than that I suspect a lot would think that because they are “registered” just like their mortgage adviser then they must have some sort of qualification and be effectively regulated.

Unfortunately the truth couldn’t be more different, for example if a rogue introducer were to pass on the contact details of 20 customers who required a mortgage and 10 of these turned out to be fraudulent applications with the other 10 having been nudged into looking for a mortgage that they plainly couldn’t afford , that introducer by the very fact that they are unregulated and not allowed to do anything other than pass on a client’s basic contact details to a mortgage broker or IFA would bear no responsibility for this, all of which would be classed the advisers problem. As long as what the registered introducer said was vague and they weren’t actually selling, the FCA could take no action against the them other than removing them from the register, however since the use of registered introducers isn’t compulsory, with some good reason since the FCA have no control over them this wouldn’t prevent them passing on their leads elsewhere in the future.

Possibly worse than that, any really corrupt introducers who had been added to the FCA register could use this to feed a line to unsuspecting clients that “they are registered to give advice but will have to pass the actual application over to someone else”, using their entry on the register to back up their story.

Maybe exclusion rather than inclusion would be more effective with mortgage brokers and IFA’s being able to refer serial introducers of fraudulent leads to a black list which could be accessed by the industry to help advisers to avoid know crooks.