FCA’s Appointed Representative regime and the regulatory focus on Principal firms
Earlier this week, the FCA published a new
Earlier this week, the FCA published a new policy statement outlining several planned improvements to the Appointed Representatives (AR) regime, which entails a number of new responsibilities for principal firms.
The changes are brought to increase the amount of supervision principals are required to conduct on their ARs to mitigate consumer harm – with a particular focus on preventing customers being recommended unsuitable products.
As the regulator notes in the statement’s opening summary:
’While the [AR] regime has benefits, we have identified a wide range of harm across all the sectors where principals and ARs operate. Where harm occurs, it is often because principals do not undertake adequate due diligence before appointing an AR, and/or due to poor ongoing control and oversight.’
The revised policy seeks to rectify the previously discovered blind spots by placing greater emphasis on transparency and accountability and reinforcing the need for principal businesses to maintain robust oversight over their ARs. The new rules will come into effect on 8th December 2022, leaving the principal firms with just over four months to review and improve their approach to the AR oversight.
This latest announcement follows the initial consultation launched in December last year, which listed many proposed changes. It also forms part of the regulator’s 2022-2025 Strategy for raising protection standards and delivering better outcomes for consumers.
What are the new expectations for firms?
First and foremost, principal firms will be required to enhance the oversight they apply to their ARs. This remit includes ensuring that their internal procedures, infrastructure and review processes are up to scratch, as are the regular assessments of the risk posed by their ARs to customers and the market.
By working with a representative, firms assume responsibility for all regulated activities carried out by that agent. And so it’s largely expected you conduct the same amount of quality control and customer safeguarding regarding ARs as you would your own business.
Principal firms will therefore need to conduct additional information on their ARs – including annual reviews of their ARs’ activities, senior management profile and wider business conduct – and be in a position to share the oversight records with the regulator when requested. They’ll also need to provide the regulator with revenue records, alongside complaints details, for each AR they’re involved with every 12 months.
In addition, the FCA will be issuing an S165 data request for principal firms to obtain further information on their ARs.
Furthermore, the principal firm has to be transparent with the FCA when terminating any AR relationship – whilst conversely notifying the regulator of any new AR appointments 30 calendar days before the start of business.
David Boyhan, TCC’s Technical Director and AR expert, comments:
’The FCA has been proactive in updating its policies to ensure that fair customer treatment is always at the forefront of financial services firms’ actions. And while the AR policy changes come as a challenge – the outcome is a better, fairer environment for the customer.’
The latest policy statement outlines how strengthening these measures aims to facilitate several improvements in business culture and consumer safety, including:
Paving the path to quality and ongoing oversight
Whilst undoubtedly a paramount upgrade, these new requirements nevertheless signal a significant step up in terms of firms’ compliance obligations – particularly those businesses working closely with multiple ARs at one time.
With the considerable effort required to meet the December 2022 deadline, specialist firms such as TCC are well prepared to offer the much-needed support the principal firms rely on to drive immediate changes and outline long-term implementation.
TCC’s team has decades of cumulative experience working with AR regulations, giving us just the hands-on expertise needed to help you build the perfect implementation plan in time for the already looming December deadline.
With an impartial, honest health check of your approach, we can ensure your plan will satisfy the regulator’s AR regime requirements from the get-go. We work with you to identify any risk concerns and highlight improvements that could make compliance with your AR responsibilities cheaper, faster and less manually intensive.
And what’s more, once your strategy has been created and thoroughly vetted, our team will be on hand to help you implement the changes and embed best practice within your day-to-day workflows.
With TCC’s authoritative second look at your review submissions before you send them off to the FCA – we’re giving you welcomed peace of mind that the regulator is getting all the evidence they need about the quality of your AR relationships.
TCC’s Technical Director and AR expert, David Boyhan, encourage the firms to act early:
‘With the December 2022 deadline, it’s time to start reviewing your AR policies and formulate long-term plans. It is crucial that policies are updated to ensure firms are meeting the new requirements in the Policy Statement’.
Whether starting from scratch with an AR regime implementation plan or just needing a second opinion that you’re not missing any critical considerations, we’re here for you.
Contact our AR experts today.