JULIAN HARRIS FINANCIAL CONSULTANTS
JULIAN HARRIS MORTGAGES LTD
MORTGAGE & RELATED “NILGI”
COMPLIANCE GUIDE
[For JHFC & JHM Mortgage / NILGI Advisers & Staff]
AS-PSHP (Feb 06) Revised (July 09)
INTRODUCTION
This Guide is produced by JULIAN HARRIS FINANCIAL CONSULTANTS & JULIAN HARRIS MORTGAGES LTD to provide basic guidance and instruction to all administrative and sales staff involved in Mortgage and related NILGI Business on what is required of them to stay compliant in the day to day application of their jobs.
All relevant parties MUST therefore be conversant with this Guide, the Firm’s Procedures and with the appropriate FSA Rules, Principles and Guidance. They should understand that they will be expected to comply with both the letter and the spirit of the requirements. Parties must also understand that failure to comply can result in summary dismissal, as well as exposing the Firm to liabilities and/or the risk of authorisation to conduct Regulated Business being withdrawn.
THIS GUIDE (AND THE FIRM’S COMPLIANCE/ADMINISTRATIVE PROCEDURES) ARE NOT AN EXHAUSTIVE SOURCE OF INFORMATION OR A SUBSTITUTE FOR THE FSA RULES. IN CASE OF DOUBT OR CONFLICT, THE FSA RULES AT ALL TIMES PREVAIL.
Any queries concerning the interpretation of this Guide, the or the FSA Rules should be referred to Julian Harris, the Firm’s Compliance Officer.
Where appropriate, reference will be made in this GUIDE to the relevant FSA Sourcebook and the Rules applicable (e.g: COND/PRIN/SYSC).
BASIC GLOSSARY
(The) Act / FSMA – Financial Services and Markets Act 2000
Adviser – Any person directly engaged by JHFC / JFM or its Appointed Representatives for the purpose of advising on Mortgage and NILGI Business
Approved Persons – Persons holding Controlled Functions within the Firm.
Appointed Representative – A firm/company and its Advisers holding an appointed representatives contract with JHFC / JFM.
FSA – Financial Services Authority.
Firm – JHFC or JFM as the context requires.
JHFC – Julian Harris Financial Consultants (and its Appointed Representatives).
JFM – Julian Harris Mortgages Ltd (and its Appointed Representatives).
NILGI – Any mortgage related “non-investment life and general insurance business” for which the Firm is authorised.
Mortgage Business – Any mortgage mediation activity transacted by the Firm (and its Appointed Representatives).
Pure Protection Contact – A non-investment insurance contract in respect of which the following conditions are met:
a) The benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or infirmity.
b) The contract has no surrender value, or the consideration consists of a single premium and the surrender value does not exceed that premium.
c) The contract makes no provision for its conversion or extension in a manner which would result in it ceasing to comply with any of (a), (b) or (c); and
d) The contract is not a reinsurance contract.
Please note that in respect of related NILGI, and in particular, mortgage protection, if any of the requirements in (a) to(d) above are not met, the business MUST be referred through the Compliance Officer to a “Life/Pension/Investment” Adviser (CF30) within the Firm.
Regulated Business – Any Life/Pension/Investment, Mortgage, and NILGI Business transacted, advised on and arranged for clients by the Firm (or its Appointed Representatives).
Regulators – The Financial Services Authority (FSA)
Staff – All Administrative and Support Staff employed or engaged by the Firm (or its Appointed Representatives).
N.B. – The words “Customer” and “Client”, as used in this Guide, are
interchangeable, as are the phrases “Client Agreement” and “Terms of Business”.
AUTHORISATION
The Firm is authorised by the FSA to transact regulated Mortgage and related NILGI business as well as (for JHFC only); Life/Pension/Investment business. It also transacts Commercial Mortgage business which is not FSA regulated, but for the sake of good business practice and effective Compliance, will be treated as regulated by the Firm.
The Firm’s “Scope of Permission Notices”, detailing the Firm’s regulatory permissions are kept by the Compliance Officer.
Authorisation Limitations
The Firm and its Advisers / Appointed Representatives is not authorised to:
§ Hold customer documentation other than on a temporary basis (less that 3 months).
§ Handle customers’ money or assets.
§ Hold a delegated bank authority on behalf of a customer.
§ Hold any delegated power, or authority, or trusteeship over a customer’s property or assets.
If any documents are held on a temporary basis, the details should be recorded in a register, separate from the customer files. (See section on REGISTERS below).
All cheques from clients, other than those for fees legitimately charged to the customer by the Firm must be made payable to the appropriate Lender or Insurer.
If you receive cash or a cheque erroneously made out to the Firm or an individual within the Firm, on behalf of a customer or for any payment by a customer, the following procedure must be adopted:
Cash
§ Any cash must be counted immediately and independently witnessed.
§ It must be returned immediately to the payer.
§ Details of the cash payment and of its return must be recorded, including the name of the person responsible for the counting and that of the witness.
N.B. The Firm does not normally accept cash payments.
Cheques
§ If a cheque or any other money order is received, made payable to the Firm, or to any Staff within the Firm, that is wholly or partly a payment for something other than legitimate fees charged by the Firm to the customer, or
§ Any signed document is received that would enable the business transacted to be dealt with in any way that allowed the Firm or any of its Advisers or Staff access to the proceeds
§ The Firm must return the cheque or document to the sender immediately
§ Details of the cheque or document and of its return must be documented.
APPLICABLE FSA RULES
The main FSA Rules, applicable to Mortgage Business are contained in FSA Sourcebook MCOB with ICOB covering NILGI business. Other Sourcebooks within the FSA Rule Handbook that are applicable include:-
§ Conduct of Business – (COBS)
§ Principles for Business – (PRIN)
§ Senior Management Systems and Controls – (SYSC)
§ Threshold Conditions – (COND)
§ Statements of Principle and Code of Practice for Approved Persons – (APER)
§ Fit and Proper test for Approved Persons – (FIT)
§ General Provisions – (GEN)
§ Prudential Sourcebooks – (MIPRU / IPRU)
§ Training & Competence – (TC)
§ Supervision – (SUP)
§ Complaints – (DISP)
(See also: “The Guide to the Tailored Handbook for Mortgage and General Insurance Intermediaries”). The FSA Handbook of Rules Principles and Guidance is accessible through the Compliance Officer and is available to all Staff.
FSA PRINCIPLES
NB. The following Principles both for business (firms) and individuals are reproduced here from the FSA Handbook and all Advisers, Appointed Representatives and Staff within the Firm should ensure that they are familiar with them, in particular those sections that apply to their particular tasks and functions.
FSA Principles for Businesses (PRIN)
Integrity
A firm must conduct its business with integrity.
Skill, Care and Diligence
A firm must conduct its business with due skill, care and diligence.
Management and Control
A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
Financial Prudence
A firm must maintain adequate financial resources.
Market Conduct
A firm must observe proper standards of market conduct.
Customers' Interests
A firm must pay due regard to the interests of its customers and treat them fairly (TCF).
Communications with Clients
A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.
Conflicts of Interest
A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.
Customers: relationships of trust
A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement.
Clients' Property
A firm must arrange adequate protection for clients' assets when it is temporarily responsible for them.
Relations with Regulators
A firm must deal with its regulators in an open and co-operative way and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice.
NB: The Firm, its Advisers & Appointed Representatives must deal with the Regulators only through its Compliance Officer.
Statements of Principles for Individuals including Approved Persons (APER)
Introduction
§ The Statements of Principles shown are similar to the FSA Principles for Businesses, but relate to individuals, not firms and the same basic high level standards apply.
§ NB: Although Mortgage and NILGI Advisers / Appointed Representatives are not currently required to be Approved Persons, these standards apply equally to them and to all administrative/support Staff in carrying out their duties.
Statement of Principle 1
A person must act with integrity in carrying out any duties or controlled function they may hold
Statement of Principle 2
A person must act with due skill care and diligence in carrying out his duties or controlled function
Statement of Principle 3
A person must observe proper standards of market conduct in carrying out his duties or controlled function
Statement of Principle 4
A person must deal with the FSA and with other regulators in an open and co-operative way and must disclose appropriately any information of which the FSA would reasonably expect notice
Additional Principles applicable to Approved Persons within the Firm.
Statement of Principle 5
An approved person performing a significant influence function must take reasonable steps to ensure that the business of the firm for which they are responsible in their controlled function is organised so that it can be controlled effectively
Statement of Principle 6
An approved person performing a significant influence function must exercise due skill care and diligence in managing the business of the firm for which they are responsible in their controlled function
Statement of Principle 7
An approved person performing a significant influence function must take reasonable steps to ensure that the business of the firm for which they are responsible in their controlled function complies with the relevant requirements and standards of the regulatory system
Code of Practice for all Staff, Advisers and Approved Persons (See APER)
The Code sets out descriptions of conduct that, in the opinion of the FSA, DO NOT comply with the relevant Statements of Principle. The Code also sets out certain factors that, in the FSA's opinion, are to be taken into account in determining whether a person's conduct complies with a particular Statement of Principle.
In respect of Principle 1
(Integrity)
Breaches might arise if a person deliberately misleads, for example by:
§ forging documents
§ mis-stating levels of risk
§ mis-stating charges or early repayment penalties
§ misleading about projections/product structure
§ overcharging a customer
§ mis-stating creditworthiness of a customer
§ providing inaccurate information to the firm, an external auditor or the FSA
§ destroying incriminating evidence
§ being unable to demonstrate suitability of advice
In respect of Principle 2
(Due skill care and diligence)
Breaches arise if a person advises, recommends or arranges:
§ when unable to justify suitability and
§ fails to understand risk exposure to his firm or the customer or,
§ fails to disclose a conflict of interest
In respect of Principle 3
(Market Conduct)
Breaches arise if a person breaches:
§ Any Inter Professional Codes
§ Any Codes of Market Conduct
§ Any Professional or Trade Association Rules
In respect of Principle 4
(Openness with Regulators)
Breaches arise if a person:
§ fails to inform Regulators of aspects of his conduct likely to be of interest to the FSA.
§ fails to answer the Regulators questions or attend interviews
§ fails to supply requested documents
NB: The following list relating to Principles 5 to 7 apply only to Senior Management in the Firm.
In respect of Principle 5
(Effective control)
Breaches arise if a Proprietor/Manager fails to ensure that individuals appointed to certain tasks are suitable - for example:
§ allowing continuance in the role despite poor performance, inadequate qualifications, etc
§ giving undue weight to sales performance
§ not filling managerial vacancies
§ failing to arrange locum cover
In respect of Principle 6
(Due skill care and diligence in Managing)
Breaches arise if a person fails to keep himself informed, for example:
§ allowing transactions he does not understand
§ allowing expansion of the business without risk assessment
§ inadequate monitoring of high value or unusual transactions
§ failing to verify validity of subordinates' explanations
§ failing to obtain independent, expert opinion when prudent to do so.
In respect of Principle 7
(Compliance)
Breaches arise if a person fails to implement appropriate systems in respect of, for example:
§ money laundering prevention
§ record keeping
§ compliance training for subordinate individuals
§ supervisory systems for subordinate individuals
§ systems for assessing business risks
§ systems for assessing contingent liabilities
§ systems for valuing the firms assets and liabilities
§ systems for monitoring the firms liquidity
§ systems for assessing financial resources (Capital Adequacy)
§ systems for prevention of misuse of privileged information
§ separation of sales and administration functions
NB: The FSA Principles do not require small firms to act or be treated as if they were large firms.
SENIOR MANAGEMENT SYSTEMS &CONTROLS (SYSC)
The SYSC Sourcebook is quite simply a set of rules and guidance, which requires firms to have in place adequate systems and controls for managing their businesses effectively. Principle 3 for businesses requires firms to organise themselves responsibly with adequate risk management systems. SYSC builds on Principle 3 and sets out how the FSA believe firms should structure their internal arrangements.