FCA to probe consolidation in advice market – Mortgage Strategy

The Monetary Conduct Authority has introduced plans to assessment consolidation inside the recommendation market.

In a letter despatched to recommendation and funding agency bosses at this time (7 October), the regulator mentioned there was a rise within the acquisition of companies or their belongings over the previous two years.

It mentioned that, whereas trade consolidation can present advantages, varied forms of hurt can happen the place this isn’t accomplished in a “prudent method” with efficient controls to advertise good outcomes.

“We plan to undertake multi-firm work to assessment consolidation inside the market,” the letter mentioned.

“The place we obtain notifications from people or companies to amass or enhance management in regulated companies, we’ll assess and problem their suitability and the monetary soundness of the acquisition.

“The place acquisitions full with out prior regulatory approval, we might use our enforcement powers to object to the transaction or provoke legal proceedings.”

The FCA mentioned it expects companies to get its approval to amass or enhance management in a agency it regulates.

A agency wanting to do that should additionally make sure the “supply of excellent outcomes” is central to its tradition.

“Your management, governance, oversight preparations and controls needs to be efficient, adequately resourced and commensurate along with your rising dimension and complexity,” the regulator mentioned in its letter.

It additionally expects acquirers or consolidators to undertake satisfactory due diligence of the promoting agency or shopper financial institution and bear in mind its supervision assessment report and steerage.

As well as, buying companies should guarantee they maintain “satisfactory monetary sources” always.

“The place acquisitions are funded by debt, it is best to have a reputable plan to service the debt,” the FCA mentioned.

“This needs to be supported by real looking and stress-tested monetary projections. The place you’re an funding agency group, you have to absolutely adjust to our prudential consolidation guidelines.”