AUTH App 4.14 Mortgage activities carried on by professional firms

Professional firms (broadly, firms of solicitors, accountants and actuaries) may carry on regulated mortgage activities in the course of their usual professional activities. The regulated activities of advising on, arranging (bringing about), making arrangements with a view to and administering regulated mortgage contracts are those most likely to be relevant.

In the FSA's view, the following exclusions are likely, in many cases, to exclude the normal activities of professional firms from amounting to regulated mortgage activities:

1. (1)

   article 67 of the Regulated Activities Order (Activities carried on in the course of a profession or non-investment business), which applies in relation to the advising and arranging activities (see AUTH App 4.10.1 G);

2. (1)

   article 66 of the Regulated Activities Order (Trustees, nominees and personal representatives) which applies in relation to each of the regulated mortgage activities (see AUTH App 4.10.5 G); and

3. (1)

   article 63 of the Regulated Activities Order (Administration pursuant to agreement with authorised person) which applies in relation to administering a regulated mortgage contract (see AUTH App 4.8.7 G); in the FSA's view, this would exclude steps taken by a solicitor to recover payments due under a regulated mortgage contract if his instructions come from an authorised person with permission to administer a regulated mortgage contract.

In addition, a professional firm may, in certain circumstances, be able to use the Part XX exemption to avoid any need for authorisation. PROF 2 (Status of exempt professional firm) contains general guidance on the Part XX exemption. In particular, PROF 2.1.9 G explains that the Treasury have specified certain regulated activities to which the Part XX exemption cannot apply in the Financial Services and Markets Act 2000 (Professions) (Non-Exempt Activities Order 2001 ("the Non-Exempt Activities Order"). AUTH App 4.14.4 G to AUTH App 4.14.6 G explain which of the regulated activities relating to regulated mortgage contracts have been so specified.

Arranging (bringing about) a regulated mortgage contract and making arrangements with a view to a regulated mortgage contract have not been specified in the Non-Exempt Activities Order. Accordingly, a professional firm may carry on these regulated activities without authorisation, provided the other conditions of the Part XX exemption are complied with.

Advising on regulated mortgage contracts has been specified in the Non-Exempt Activities Order. However, a professional firm is prevented from using the Part XX exemption to advise on regulated mortgage contracts only if the advice it gives consists of a recommendation. This will be the case if the recommendation is made to an individual to enter into a regulated mortgage contract with a lender who would, in entering into the contract, carry on the regulated activity of entering into a regulated mortgage contract, irrespective of whether the lender is an authorised or exempt person or would carry on the activity by way of business. However, a professional firm is allowed to give advice that involves a recommendation of this kind provided the advice endorses a corresponding recommendation given to the borrower by an authorised person who has permission to advise on regulated mortgage contracts or an exempt person whose exemption covers that activity.

Entering into a regulated mortgage contract and administering a regulated mortgage contract have both been specified in the Non-Exempt Activities Order. As an exception, a professional firm is allowed under the Part XX exemption to carry on these regulated activities if the firm is acting as a trustee or personal representative. But this is provided that the borrower is a beneficiary under the trust, will or intestacy.