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FCA to change appointed rep rules from December

The Financial Conduct Authority (FCA) will implement new rules to make authorised firms more responsible for the appointed representatives (ARs) from December.

The changes are part of the watchdog’s crackdown on appointed representatives

From December, principal firms will need to:

  • Apply enhanced oversight of 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.
  • Notify the FCA of future AR appointments 30 calendar days before it takes effect.
  • Provide complaints and revenue information for each AR to the FCA on an annual basis.

The new rules do not change the fact that principals are responsible for the activities of their ARs.

Sheldon Mills, executive director for consumers and competition, said: “While appointed representatives can bring innovation and choice, principals and ARs account for more than 60% of the total value of recent claims to the Financial Services Compensation Scheme. They also generate up to 400% more supervisory cases and complaints than other directly authorised firms.

“The changes we’re making will help ensure that principals manage their ARs better – ensuring that they provide the oversight needed to avoid consumers being mis-sold or mis-led and to make sure markets can operate safely and fairly. They will also need to provide us better data and information to support our own work.”

The changes will affect many financial advisers who currently operate as ARs, as well as the firms who oversee them.

ARs are not directly authorised by the FCA. They can only offer certain financial services or products under the responsibility of principal firms who are responsible to ensuring the compliance of the ARs.

According to the regulator there are currently 3,400 principal firms with appointed representatives.

The FCA has previously expressed concerns that whilst some principals do this effectively, others do not adequately oversee the activities of their ARs

The regulator believes its new rules will help prevent customers being mis-sold by ARs and will prevent ARs undermining markets.

The new rules will take effect on 8 December.

The regulator has put transitional arrangements in place to give firms more time to comply with the new rules on submitting information and annual reviews.

The FCA added that it is also increasing scrutiny on firms applying for authorisation and as they appoint ARs as part of its new three-year strategy to improve outcomes for consumers and markets.

The regulator is also currently working with HM Treasury to explore if further changes are needed to the AR regime, which would require future legislative change.

Parliament introduced the appointed representatives’ regime through primary legislation in 1986.



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