FCA confirms new rules to improve oversight of Appointed Representatives

Appointed Representatives (ARs) are not regulated by the FCA, so it is Principal Firms’ responsibility to ensure that their ARs comply with the rules. The FCA has said that, whilst some Principal Firms do this effectively, many do not have adequate oversight of their ARs.

To combat this potential customer detriment the FCA set out proposed new rules in its Consultation Paper CP 21/34 which would put more responsibility upon Principal Firms. The FCA has now published its Policy Statement in this regard, PS 22/11 Improvements to the Appointed Representatives regime.

Under the new rules Principal Firms will need to:

  • Apply enhanced oversight to their ARs, including ensuring they have adequate systems, controls, and resources.
  • Assess and monitor the risk that their ARs pose to consumers and markets, providing similar oversight as they would to their own business.
  • Review information on their ARs’ activities, business, and senior management annually, and be clear on the circumstances when they should terminate an AR relationship. As part of this Principals will be required to prepare a self‑assessment document (single document designed to identify any risks and gaps in compliance with the firm’s obligations as a principal) at least once a year, covering how they meet the requirements of the policy.
  • These annual reviews can be conducted by responsible individuals with a suitable degree of knowledge and authority below the governing body’s level, with an appropriate line of escalation to the governing body of any significant issues identified at specific ARs. Firms can meet these requirements by integrating them into existing internal reporting processes, as long as they continue to meet the standards set out in the rules and guidance.
  • Notify the FCA of future AR appointments 30 calendar days before they take effect, reducing the notification period from the previous 60 days.
  • Provide complaints and revenue information for each AR to the FCA on an annual basis. Firms will have 60 days to complete this and the FCA are introducing revenue bands for annually reporting AR revenue from non-financial non-regulated activities.

As part of the enhanced reporting requirements, Principal Firms should expect to receive a Section 165 data request from the FCA later in the year. Section 165 requests from the FCA are not optional and must be responded to, providing the requested information. Principals will have 60 days to respond to the request.

These changes will take effect on 8th  December 2022 following a four‑month implementation period.  We will provide further information in the coming weeks, but we urge Principal firms to review the FCA’s publications and understand their implications.

UKGI is a trading style of UKGI Limited and UKGI Services Limited which are wholly owned subsidiaries within UKGI Group Ltd. UKGI Limited acts in compliance services and UKGI Services Limited acts in support services. UKGI Services Limited is a wholly owned subsidiary of Total Broker Solutions Limited, which is an appointed representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority (FCA) under reference number 421154. UKGI Limited Registered in England No. 03544014. UKGI Services Limited registered in England No. 04953835. All Registered Offices Number 22 Mount Ephraim, Tunbridge Wells, England TN4 8AS. VAT registration number 347 2664 82.