In just a few months, the Financial Services Authority (FSA), which regulates most financial services, will also become responsible for regulating mortgage advice, lending and administration and general insurance sales. Many firms and individuals are now setting up new companies to help them comply with the new FSA regulations.
(PRWEB) March 25, 2004 -- The powers of the Financial Services Authority (FSA) which regulates most financial services, markets and firms are to be extended to include intermediation and advice relating to mortgage lending and general insurance sales.
From 31st October 2004, the FSA will be responsible for regulating mortgage lending and administration. From 14th January 2005 its powers will extend to the regulation of general insurance sales (e.g. home buildings and contents, mortgage payment protection, motor and travel insurance).
To avoid criminal prosecution, firms must operate in strict accordance with the new FSA rules from these dates. Businesses and individuals carrying out regulated mortgage and insurance activities have two choices if they wish to continue to be actively involved in the mortgage and/or general insurance business:
· To become directly authorised by the FSA
· To become an appointed representative of an authorised firm.
In the latter case a written contract must be drawn up between the appointed representative and the authorised firm which will set out, amongst other things, which areas of compliance are the responsibility of the ‘host authorised firm. Furthermore, the regulations require insurance intermediaries to take out Professional Indemnity Insurance Cover of at least one million euros per claim, or to have a comparable guarantee.
Firms and individuals need to be authorised (or become an appointed representative) for each area of activity. Many will seek direct authorisation in one area (e.g. mortgage advice) but will prefer to become an appointed representative in another (e.g. insurance advice). It will not be possible for a firm to be directly authorised and operate as an appointed representative simultaneously. In this case it will be necessary to operate each area through a separate legal entity.
To ensure a clear separation of business activities, many firms are incorporating new companies which as separate entities can apply for direct authorisation with the FSA or become appointed representatives, as appropriate. By so doing, they are able to comply with the new FSA regulations in an efficient and cost-effective manner.
If youd like to find out more about company formation, visit www.companyregistrations.co.uk/company-formations.asp or call 0870 755 4545.
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