Non-regulated brokerage interviewed by FSA

Non-regulated brokerage interviewed by FSA



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In what one broker has described as “regulatory attention as a result of bad practices”, the FSA has begun to research the many bridging brokerages operating within the non-regulated sector of the market.

Non-regulated brokerage Centrado was subject to this interview process yesterday and, sharing his concerns about the motivations behind such research, which suggests regulated is now

“pretty much a given”, the firm’s CEO, Mel Fordham, speaks exclusively to B&C…

The interview was conducted by a market research company ‘Critical’ on behalf of the FSA. Most of the questions were regarding the last year’s audited/confirmed figures and fiscal position, however, given that we have not completed a full year’s trading I could not answer with any accuracy.

Whilst the main questions and slant during the interview related activity covered by our CCL, technology, record keeping and compliance, at the end of the interview I was asked if I could or would be prepared to provide the FSA with our profit and loss, balance sheet and various other confirmations of our business by email.

Whilst we have nothing to hide and I am totally confident we avoid any transactions that could be considered as regulated, as we have only been trading since October, we have yet to produce our first year’s accounts and therefore could not comply with the request. Our previous record as a regulated entity will I hope stand us in good stead.

Yet, from my perspective, the diametric of the interview changed very quickly from a general information gathering exercise from an external research company to a request for the most detailed and sensitive information, to be supplied directly to the FSA.

For the sceptics, I think this is the clearest message yet (that I have seen anyway) that the FSA is narrowing its focus on bridging and the short term lending sector. I am not aware of any other broker that has been asked to take part in this interview, but I’m sure there are plenty.

Without doubt, I think the industry is receiving this regulatory attention as a result of bad practices of the few that have such damaging consequences on the many and give the impression that there is widespread endemic client detriment, which, as we know, couldn’t be further from the truth.

One of my greatest concerns with the implications of full regulation is simply that bridging is one of the only finance products currently available that has dexterity and can be used in an innovative manner. It is this uniqueness and flexibility that may be jaundiced, in order to make bridging fit the regulatory parameters. This, coupled with lenders’ concerns for reputational risk, fines and public rebuke, may result in innovation being considered maverick lending. I honestly think that the diversity of bridging does make it inherently complicated and difficult to understand.

My experience is that compliance is all consuming; never definitively reaching the goals it sets for itself, ever-changing, ever-evolving, always refocusing, always metamorphosing and re-examining that which has previously been considered. Invariably, compliance has no regulator to which it has to answer to itself.

In this respect, especially after consideration of the context of the call today, I would imagine full regulation of the short term lending market is pretty much a given.

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