Introduction

At Buckingham Capital Consulting, we specialise in guiding firms through the FCA authorisation process for mortgage brokers and lenders. Navigating the regulatory landscape can be complex, but our team of experts is here to simplify the process and ensure your firm meets all regulatory requirements. This guide will provide detailed information on what is needed for authorisation, focusing on the Mortgage Conduct of Business Sourcebook (MCOB) and other relevant regulations.

 

Understanding FCA Authorisation

Mortgage Brokers and Lenders: Mortgage brokers and lenders need to be authorised by the FCA to ensure they operate within the regulatory framework that protects consumers and promotes market integrity. The FCA’s authorisation process ensures that firms have the necessary controls, resources, and procedures to offer mortgage services responsibly.

​

Key Regulations and Requirements

1. Mortgage Conduct of Business Sourcebook (MCOB): MCOB sets out the rules and guidance for firms engaging in mortgage activities. It covers various aspects including advertising, sales, disclosure, and conduct of business standards.

• Advertising and Promotions: Firms must ensure that their advertising is clear, fair, and not misleading. This includes all forms of marketing communications. For example, if a mortgage broker advertises a particular interest rate, they must also include the Annual Percentage Rate (APR) and any other charges applicable.

• Pre-sale Disclosure: Before entering into a mortgage contract, firms must provide consumers with key information in a clear and understandable format. This includes details about the mortgage product, costs, and any risks involved. A typical example would be providing a Key Facts Illustration (KFI) document that outlines the main features of the mortgage.

• Advice and Sales Process: When providing advice, firms must ensure that their recommendations are suitable for the customer’s circumstances. This involves conducting a thorough assessment of the customer’s financial situation and needs. For instance, a mortgage broker should consider the customer’s income, expenditure, and future financial commitments when recommending a mortgage product.

• Responsible Lending: Lenders must carry out affordability assessments to ensure that customers can afford the mortgage repayments. This includes stress testing the borrower’s ability to pay if interest rates rise. For example, a lender should check the borrower’s income, outgoings, and any other debts to ensure the mortgage is affordable both now and in the future.

​

2. Threshold Conditions: The FCA sets threshold conditions that firms must meet to be authorised. These include:

• Effective Supervision: Firms must have adequate systems in place to allow the FCA to supervise them effectively. This involves having clear governance structures and lines of responsibility. For instance, a mortgage broker must have systems to monitor and report their activities accurately.

• Appropriate Financial Resources: Firms must demonstrate that they have sufficient financial resources to carry out their activities. This includes having adequate capital and liquidity to cover their business operations and any potential risks.

• Suitability: Individuals running the firm must be fit and proper, possessing the necessary skills, experience, and integrity to operate the business. This might involve background checks and assessments of key personnel.

• Business Model: Firms must have a sustainable business model that demonstrates they can meet the needs of their customers while complying with regulatory requirements.

​

3. Conduct Rules: The FCA’s conduct rules require firms to act with integrity, ensure fair treatment of customers, and manage conflicts of interest. For example, mortgage brokers must avoid conflicts of interest by not recommending products that offer them higher commissions unless these products are genuinely in the best interest of the customer.

​

Application Process

1. Preparation:

• Programme of Operations: Detail your business activities, target market, and operational procedures. This includes a description of how you will market your services, manage customer relationships, and handle complaints.

• Business Plan: Provide a comprehensive business plan with financial forecasts, showing how your firm will generate revenue and remain financially stable.

• Internal Controls: Develop robust internal controls to ensure compliance with FCA regulations. This includes policies for risk management, data protection, and anti-money laundering (AML) measures.

2. Submission:

• Connect System: Register and submit your application via the FCA’s Connect system. Ensure all forms are completed accurately and all necessary documents are attached.

• Application Fee: Pay the relevant application fee, which varies depending on the type and scale of your business.

3. Review and Approval:

• FCA Assessment: The FCA will review your application to ensure it meets all regulatory requirements. This may involve additional questions or requests for further information.

• Decision: The FCA aims to make a decision within six months for complete applications. Be prepared to provide any additional information promptly to avoid delays.

 

Ongoing Compliance

Once authorised, firms must maintain compliance with FCA regulations through continuous monitoring and regular updates to their policies and procedures. This includes:

• Regular Reporting: Submitting periodic reports to the FCA on financial health, compliance, and customer outcomes.

• Compliance Audits: Conducting regular internal audits to ensure ongoing compliance with all relevant regulations.

• Training and Development: Ensuring all staff members are trained and up-to-date with the latest regulatory requirements and best practices.

 

How Buckingham Capital Consulting Can Help

Expert Guidance: Our team provides tailored support throughout the FCA authorisation process, from initial application to ongoing compliance.

 

Document Preparation: We assist in preparing all necessary documents, including business plans, financial forecasts, and compliance policies, ensuring your application is comprehensive and accurate.

​

Compliance Framework Development: We help develop robust compliance frameworks, including risk management, AML, and customer protection measures, tailored to your business model.

​

Ongoing Support: We offer ongoing compliance monitoring, regulatory updates, and staff training to ensure continuous adherence to FCA regulations.

 

Conclusion

Achieving FCA authorisation as a mortgage broker or lender requires thorough preparation and a deep understanding of regulatory requirements. By following this guide and leveraging the expertise of Buckingham Capital Consulting, you can navigate the process confidently and establish a compliant, customer-focused business.