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Removal of Non-advised Sales

The new Mortgages and Home Finance Conduct of Business sourcebook (MCOB) rules, which come into force on 26 April 2014, will remove the non-advised sales process. After 26 April 2014, the rules will allow firms to conduct advised sales and, in limited circumstances, execution-only sales. This will affect the way firms sell home finance products and may require some firms to vary their Part 4A permission and/or consider whether their employees have appropriate qualifications.

Key points

  • Under the new rules firms will be unable to operate a ‘non-advised’ sales channel from 26 April 2014.
  • Interactive sales (e.g. face-to-face and telephone) will most likely need to be advised.
  • Vulnerable customers (equity release, sale and rent back, right-to-buy products, or where the main purpose of raising funds is to consolidate debt) must always be given advice.
  • Firms do not have to give advice and can sell on an execution-only basis where:
    -- it is a non-interactive sales process (e.g. a pure online sales process or by post) where it is not practical to give advice; or
    -- the customer is high net worth, a mortgage professional, or the loan is solely for business purposes; or
    -- the customer has rejected the advice given and wishes to proceed with a product of their own choice (this is not available for sale and rent back customers).
  • Firms must always obtain the customer’s consent to proceed on an execution-only basis and must notify them of the consequences of not receiving advice.
  • Firms are not able to promote or encourage customers to reject their advice and proceed on an execution-only basis.

Action required

You will need to review your business model and if you want to operate an interactive sales process, it is likely that you will need to provide advice to your customers. Therefore in offering an advised sales process, you will need to consider:

  • permissions – does the firm’s Part 4A permission include the relevant regulated activities to provide advice, for example ‘Advising on regulated mortgage contracts’, ‘Advising on home reversion plans’, ‘Advising on home purchase plans’, ‘Advising on sale and rent back agreements’. A firm must be authorised by the FCA to carry out a regulated activity and if you do not have this, you will need to submit a Variation of Permission (VoP) application. Be aware that the FCA has six months to assess your application for authorisation if this is complete, with up to 12 months for an incomplete application. (An application is complete when the FCA has received all the information and evidence needed to make a decision).
  • qualifications – the Training and Competence rules (as amended by the MMR final rules) require all sellers (advised and execution-only), except those operating solely in the business loan market, to be assessed as competent, which requires them to hold an appropriate qualification. The qualification requirements have not changed under the MMR and individuals will be required to obtain CeMAP or a level 3 equivalent to provide advice. Individuals have 30 months to attain an appropriate qualification and the time starts from when the individual starts to carry on the regulated activity. Those who do not hold an appropriate qualification will however be able to provide advice under supervision during the 30-month period. You will therefore need to ensure a suitable number of supervisors to oversee trainees.
  • policies and procedures – does the firm need to develop policies and procedures to operate an advised sales process;
  • systems – are the firm’s systems adequate to offer an advised sales process; and
  • controls – does the firm have appropriate controls to monitor an advised sales process.

Information required to support a VoP application to add an ‘Advising on’ activity or activities?

The information required to assess an application will vary depending on your firm and firm type. However, when submitting your application you should provide the relevant information in the table below.

Lenders and administrators


A description of how products will be sold from 26 April 2014 (post- MMR implementation) under the new advised and execution-only rules to include description of interactive and non-interactive sales channels, distribution model, sales incentives, expected percentage of advised/ execution-only sales.


The number of advisers, including the:

  • number that are qualified;
  • number of trainees working towards qualification and competence; and
  • ratio of supervisors to trainees.
tick tick

Where fewer than 50% of advisers are qualified, the firm’s Training and Competence arrangements, including:

  • the firm’s training plan; and
  • timeline to get staff to qualified status.
tick tick

Firm to self-certify that it has revised its policies, procedures and compliance monitoring plan to reflect the addition of advised sales

tick tick

Firm to self-certify that it has implemented all necessary changes to its IT systems and that they are fully tested and operational, or if not, the date when it is planned they will be completed.


If the firm intends to outsource its advice function, details of the outsourcing arrangements, including:

  • details of oversight responsibilities and arrangements, systems and controls for the outsourced functions relevant to providing advice to customers; and
  • copies of service level agreements and arrangements relevant to providing advice to customers.
FCA links: