Terms and definitions
By Rob Lankey, CEO
We use the terms registered individuals, appointed representatives and agents and, as of now, we charge each of them the same sum, in the same way. But as with any newfangled terminology, it’s easy for a broker to say “well, I don’t think of him/her as an appointed representative.” Let me use this space, then, like a little glossary so that we are all literally on the same page.
An employee of a firm who generates income by dealing directly with customers and giving advice will qualify as a registered individual. Support staff and deal coordinators will not fall within the definition of a registered individual.
A registered individual (RI) is our own term for an employee of the firm who generates income for the firm by dealing directly with customers and giving advice. Support staff and deal co-ordinators are not RIs.
An appointed representative (AR) is different. An AR is an individual (or a firm) who has been appointed by the broker firm to undertake the sale of financial products, or to give advice on financial product to commercial and retail customers. The broker firm will not need to register the AR with the NACFB so long as the AR’s primary activity is neither credit broking nor related to financial services. They must not actively discuss with, nor give advice to, the customer.
An agent, franchisee, associate or introducer (henceforth brought together under the umbrella term of agents) is an individual or firm that acts on behalf of the Member firm and transacts business through the Member firm. They may use the Member firm’s trading style or they may instead trade under their own style. Agents will potentially deal directly with the customer, but utilise the funding lines of the Member firm. Introducers who fall within the definition above will be treated as agents and need to be registered. And any party which is not registered with the NACFB must not use the NACFB logo on marketing material.
Anyone who thinks they fall between cracks between any of these definitions should bring it to our attention because the fact that any of these definitions seems to mostly apply to an individual most likely means that we regard it as fair that the Member firm in question ought to have this individual reflected in their fee structure.
The resolutions you should not have broken yet
Whether you’re one of those lucky Members with an NACFB visit lined up or not, you should have in place:
- A company structure chart
- A compliance monitoring plan and compliance procedures
- Details of key business risks
- A business plan
- Treating customers fairly procedures
- Anti money laundering procedures
Even if you’re only trading under limited permission, as opposed to full permission, the FCA requires that you do this. Even the smallest office has to imagine itself functioning like a bank, and to have the same safeguards in place against a variety of worst case scenarios.
How could you go beyond these criteria – and why would you want to? Well, one way is to have professional indemnity insurance, which isn’t (yet) an FCA requirement, but has always been an NACFB one.
Another way is to double up on your note-taking, particularly when deciding which lender to approach. And a third way would be to lean harder on the NACFB templates that we have produced. The idea is that because our templates have been created by solicitors, checked by a second wave of solicitors, and then signed off by yet more solicitors, they’re probably a little bit more secure than documents you may have drawn up yourself, and the body that put them together will stand up for you if you use them.
Our terms of business is a good example of a treble-checked document, as it’s been subject to continual revisions to keep it up to date with the FCA’s clarifications. We offer it in two flavours, regulated and non-regulated. The latter goes hand in hand with our unregulated Members policy, a document which we spent a long time putting together and which, paradoxically, we’d like to see used as little as possible because when a new Member approaches us, saying they plan never to touch regulated business, our first question is “why not?”
The recent changes to our industry have also meant revisiting our code of practice, a new version of which is now available in hard and soft copies. Neither of these documents made mention of the FCA until recently, nor did they have very much to say on the intricacies of being an AR. Although the spirit, the underlying themes and values of the code of practice haven’t changed since the Association’s inception, the wording of our criteria and expectations was plainly in need of alterations, and so that was topic number one on the old 2015 to-do-list.
A lot of the new rules can be translated into simple English as follows: the consumer needs protection from lack of clarity, from unreasonable costs, from a shortfall of knowledge about commercial finance per se.
Members who have been unable to get FCA permission will not be allowed to:
- Accept business from individuals, sole traders, partnerships of three or fewer partners or an unincorporated body, because the FCA thinks they probably don’t know enough to understand what’s going on, and so you’re in loco parentis
- Act on behalf of nor advise an individual or partnership of up to three persons in relation to a debt due under a credit agreement or a consumer hire agreement
Both debt adjusting and debt counselling are considered regulated activities and join the list of things you must not do if you don’t have full permission.
It’s our aim to encourage brokers to move away from a situation where they find themselves unable to help clients, and that means we won’t want large numbers of unregulated brokers. We just need people to exceed, not simply meet, the regulatory criteria. So whether it’s January, February or July, the same new year resolutions apply.
What is My NACFB?
That is the name for our new training & education programme. Those of you who have been Members for a few years will remember this is something we have offered in the past, but the new version is much improved and offers a whole lot of extra functions that the old training modules did not.
Proper feedback, recommended further reading, and a red-amber-green countdown graphic all help you not just to pass the exams, but to learn relevant information and to prompt you if you need prompting. Competent Adviser, who have set up the system, have won awards for the depth of thought they put into the design. When we let it be known we were looking for a provider of new training modules, Competent Adviser won us over with the completeness, and the high levels of innovation in their programme.
New website countdown
We’re now on schedule for a March 16th launch!
A few last-minute changes are taking place to reflect the user experience reported back by our guinea pigs, and most of those changes are to do with the online renewals process. Thank you for your patience in waiting for this long-overdue refurbishment.