The Financial Conduct Authority (FCA) has introduced rules targeted at the supervision of appointed representatives (ARs) after launching a consultation in 2021.
The regulator is not directly responsible for ARs because they are not authorised by the FCA; rather they can offer certain products or services under the responsibility of authorised firms – also known as principals.
But the watchdog said that, while some principals effectively monitor their ARs, “many do not adequately oversee the activities of their appointed representatives”.
The newly introduced rules will now prevent consumers from being mis-sold or misled by ARs as well as prevent misconduct by appointed representatives.
They set out that principals will need to:
- Apply enhanced oversight on their ARs, including ensuring they have adequate systems, controls and resources;
- Assess and monitor the risk that their ARs pose to consumers and markets;
- Review information about their ARs’ activities, business and senior management annually;
- Notify the FCA of future AR appointments 30 days before they take effect; and
- Provide complaints and revenue information for each AR to the regulator every year.
Responsibility
As part of its oversight push, the FCA is also undertaking “targeted supervision of principal firms across the whole financial services sector”, as well as greater scrutiny on firms applying for authorisation and when they name appointed representatives.
But the regulator clarified that the rules do not change the fact that, ultimately, principal firms are responsible for the activities of their appointed representatives.
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 misled 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.”
