Confirmed changes to the Appointed Representative regime

The Appointed Representatives (AR) regime allows unauthorised firms or individuals to engage in regulated activities on behalf of a firm authorised by the FCA (the principal).

The new rules introduced in PS 22/11 came about because the FCA identified poor due diligence prior to the appointment of ARs and inadequate oversight and control over them.

What is changing?

• Information requirements – Principals must provide additional information about ARs to the FCA, such as;
  • Notifying FCA of AR appointments 30 calendar days before the start date
  • Providing complaints data and revenue estimations from ARs
  • Outlining the main reason for the appointment of an AR
  • Outlining the regulated activities that the AR will conduct

The improved data collection from the FCA is intended to allow early intervention in potential misconduct, reducing consumer harm.

• Principal’s responsibilities – Principals have clearer responsibilities and expectations for their handling of ARs, including;
  • Enhanced oversight through annual assessments of AR’s fitness and competency
  • Ensuring ARs act within their scope and assessing the risk they provide to consumers
  • Guidance on what principals should consider when identifying potential risks of harm
  • Clarifying circumstances when AR relationships should be terminated

The additional clarity on the principal’s responsibilities and the ability to address problems will allow for greater stability of the AR’s position. If a firm can more easily recognise when ARs act outside of their scope, this will reduce the possibility of consumer harm. It should also reduce misconduct and complaints from customers, support consumer protection and market integrity.

The FCA clarify that AR contracts should be terminated where principals cannot keep up with the AR’s growth, though they accept that principals are best placed to determine the appropriate steps. Principals must first aid the AR in winding down the relevant business.

Next steps

The FCA are increasing scrutiny on firms as they appoint ARs and are working to see if further changes to the AR regime are necessary.

These changes are set to take place on 8 December 2022, firms will then have to provide complaints data and revenue estimations annually.