As the new FCA’s S165 data collection for Principal firms comes into action this Thursday 8th December 2022, let’s remind ourselves what is changing – and why it’s critical to act now.

Last year it was widely reported across the press that David Cameron lobbied for Greensill Capital (where he was employed as an adviser) to join a scheme that issued government-insured loans. This brought unprecedented focus to Principal firms and the Appointed Representatives regime.

FCA’s review of the Appointed Representative regime
As Greensill was an Appointed Representative, the action the FCA could take was limited. The Treasury Select Committee recommended a review of the Appointed Representative regime. There was a Call for Information from HMT, and the FCA has published a Consultation Paper followed by Policy Statement (PS22/11) confirming new rules and its expectations in relation to Principal firms.

In reality, it is not surprising that the FCA is looking into the Appointed Representative regime. The regime started in 1986 and has grown significantly. There are approximately 3,400 Principal firms overseeing circa 37,000 Appointed Representatives.

Addressing the supervision concerns

By Thursday, 8th December, firms should have a plan in place detailing how they will undertake an annual assessment of their Appointed Representatives to address the concerns about this regime.

The FCA has also flagged the number of supervisory cases it has for Principal firms and the proportion of FSCS claims related to firms in the regime. Two of the FCA focus areas highlighted in its strategy document released earlier this year are:

• Reducing and preventing serious harm
• Setting and testing higher standards

This focus applies equally to Appointed Representatives as it does to Directly Authorised firms.

With the FCA introducing the Consumer Duty in 2023 that includes a new Principle 12 so that firms act to ensure good customer outcomes, it is essential that Principal firms take appropriate action to ensure compliance with PS22/11. This includes being compliant with the new rules and ensuring that the Principal’s oversight of Appointed Representatives meets the FCA’s expectations (which are confirmed in the Policy Statement).

So what should Principal firms be doing now?

Take action to ensure regulatory compliance

There are several considerations and actions that Principal firms need to take, here are our experts’ recommendations:

• Appointed Representatives oversight – make sure that your firm has appropriate oversight of its Appointed Representatives. The FCA’s expectations are outlined in the Policy Statement and are designed to help ensure that customers receive good outcomes. If any gaps are identified, you’re required to address these as priority.
• Reporting requirements – ensure that you have processes in place to meet the new reporting requirements. This includes making sure that appropriate processes are operational to collect information from Appointed Representatives, such as complaints and revenue. It is crucial that the data requested by the FCA is reported accurately.
• Annual assessment – have a plan in place to undertake the annual assessment of Appointed Representatives. This will need to be completed before 8th December 2023, but you should start planning now. This is especially important with the emphasis placed on the self-assessment document, which needs to be reviewed and signed off by the governing body.
• S165 Information Request – get a plan in place and start collecting the information required for the S165 Information Request on your firm’s Appointed Representatives. The FCA has confirmed that the data requests will be sent between 8th -12th December 2022 – and Principal firms will have only until 28 February 2023 to complete them. Clearly, the more Appointed Representatives a Principal firm has, the more resource will need to be put into this date request.

How to ensure that your firm is meeting the new rules of the Appointed Representatives regime?

Get help from the experts. With our specialist knowledge of the Appointed Representatives regime and Policy Statement 22/11, TCC can help you make sure that your firm is meeting all the new rules and the FCA’s confirmed expectations in relation to Principal firms.

To find out how we can help you deliver Appointed Representatives regime compliance, get in touch today.