Compliance is easy

Said no aggregator ever. Or any other organisation trying to charge a you a fee to get and keep you compliant. Of course, it is in their interest to make-out that compliance for your business is complicated, stressful and time consuming.


The reality, however, is compliance for mortgage advisors is a pretty simple and straight-forward process. In fact it could have a financially positive effect for many license holders.


If we start with the simple premise that as mortgage advisors, we are aiming to conduct our business efficiently, honestly and fairly we are already a long way down the compliance path. Similarly, ASIC have taken the same approach in Regulatory Guideline (RG) 205.


The problem is that compliance requirements are usually written in tight legalese. Meaning the language is rarely plain English. Another major problem is that compliance requirements are not drafted by people who do the business or write loans. Lawyers or bureaucrats draft compliance requirements, so there is often a disconnect between the intentions of the compliance requirement and actually doing the business.


Back to RG205, which is a remarkably simple to read 37-page document. After we understand that the general jist is to run and efficient, honest and fair business the second concept we need to understand is the need to be seen to be compliant – not just be compliant. This is a little trickier for many of us to get our heads around.


Strange as it may be, this is the part where actually being compliant is not enough. We must be able to prove we are compliant. When we are audited, we will need to show evidence of our compliance.


In order to be seen to be compliant we must document our compliance. This is where a little time is required. However, keep in mind that RG205 paragraphs 53 to 56 explain clearly that “As a general rule, the smaller and simpler your business, the smaller and simpler we (ASIC) expect your measures to be”.


Similarly, according to international standard (IS) 19600:2014 – Compliance Management Systems: the scope of any compliance management system will depend on the size, structure, nature and complexity of the organization. The standard simply applies the principles of good governance, proportionality, transparency and sustainability.


Hence a large publicly listed or bank owned aggregator will need very complex and well resourced compliance systems. While a one-man mortgage advisor could have a simple checklist on the cover of each file as their compliance system.


Put simply compliance needs to come from the top down. Transparency simply requires that written procedure documents are available. Finally, and most importantly, the compliance management system must ultimately help the business into the future.


These principles are applied to the mortgage advisor industry in a very practical and sensible approach.


Training and competency to perform your duties is obvious in any business. CPD Points is a simple way to document this requirement.


Understanding and managing conflicts of interests does not mean that conflicts do not exist. Normal business is full of conflicts of interest. The requirement is simply that they are identified, documented and if necessary, advised to stakeholders.

Maintaining appropriate internal and external dispute resolution systems. The second part to this requirement is simply

that your clients are advised of their dispute resolution options.


Adequate resources such as staff and cashflow is very simple to manage for a small business. Similarly, using appropriate information technology and compliance systems is required.


Having appropriate compensation requirements, which for most of us means we need to have current professional indemnity insurance.

We must also understand and follow the Responsible Lending Guidelines including the need to ascertain and verify a clients financial position and assess whether credit contract is not unsuitable under the National Consumer Credit Code.


The vast majority of mortgage advisors would easily comply with all or most of the above requirements. However, compliance is not simply a matter of being compliant. A key requirement of the compliance management system is to have the system documented. The licensee must be able to demonstrate that they comply with these obligations. And this is where most mortgage advisors fail or at least require improvement.


When did you meet with your clients to discuss their requirements and affordability? Who was at the meeting? What notes were taken? When and how did you provide your Credit Guide, Loan Discussion Summary and Product Disclosure Statement


Whether you use a paper file system or IT based compliance system such as iLEND the key requirement is to document. Document what you are going to do and document what you do -do.


As a credit licensee, you are responsible for deciding how you comply with these general conduct obligations, pursuant to RG205.8 – RG205.10.


Compliance monitoring systems are not designed to catch criminals or to punish wrong doers. The key role of the CMS is to monitor and understand the business, highlight areas that need upgrading and simply give helpful feedback to the stakeholders.




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