UP FRONT • REGULATION
FMA reveals plans for full licensing Adviser businesses applying for a full licence will have to meet eight conditions. BY SUSAN EDMUNDS
T
he Financial Markets Authority has revealed the approach it will take to full licensing for mortgage advisers under the new regime. The new FSLAA regime is expected to take effect in March next year, when all market participants will need to have a transitional licence. Applications for full licences will open at the same time – and all financial advice providers (FAPs) will need to move to a full licence within two years. Financial advisers can apply for their own FAP or choose to work under
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another. Mortgage adviser groups have signalled that they will offer an option for their members – although that will come with extra liability and responsibility on those groups. The FMA said adviser firms would be licensed according to the size and scope of their business.
Licence classes It said that it was proposing three licence classes for financial advice providers, which would enable the application process to be tailored with appropriate questions for the type of business being licensed. Class A licences will apply to advisers who give advice on their own, as part of a one-adviser business. Class B licences will be for firms that have multiple advisers but no nominated representatives, such as larger advice businesses and groups. Class C licences permit the holder to engage nominated representatives or another entity – these are likely to be the big product providers that currently operate as QFEs. "Licence classes apply to the manner in which regulated financial advice may be provided but do not limit the types of financial advice that may be provided under the licence, as the latter is addressed by the competency requirements in the new code. Licence classes are incremental from A to C. Each incremental class of licence incorporates and permits all service classes below it,” the FMA said. John Botica, FMA director of market engagement, said: "We’re pleased to open this consultation as it will give
financial advisers further clarity on their obligations under the new regime. "Our proposal to specify three classes of financial advice recognises *the diversity of business structures in the industry and will allow advisers to apply for the class that’s most appropriate for them." Botica said the three classes – along with the tailored questions and assessments based on the complexity of the financial advice provider structure – will ensure the application process is straightforward, particularly for small advice businesses.
Criteria The FMA is considering eight standard conditions for full licences: record keeping, internal complaints process, regulatory returns, outsourcing, professional indemnity insurance, business continuity and technology systems, ongoing capability, and notification of material changes. Record-keeping and internal complaints are the same conditions as will apply to transitional licences and the regulator said there was widespread acceptance of those. FAPs will also be required to have appropriate professional indemnity insurance, ensure outsourcing agreements allow them to meet their market service licensee obligations at all times, and have a business continuity plan that is appropriate for the business. "If you use any technology systems, which if disrupted, would materially affect the continued provision of your financial advice service (or any other
