FCA Rules to Tighten up the Appointed Representatives Regime (PS22/11)

New rules to enhance oversight of Appointed Representatives (including Introducer Appointed Representatives)

 

New Appointed Representative oversight rules.

Through their press-release issued today (available here - press release)  by the FCA, firms will be subject to new rules to improve the oversight of their Appointed Representatives. 

For some time, it has been known that the current regulatory regime does not leave a lot of room for the FCA to pro-actively engage with firms with respect to their obligations towards their ARs.

 

Therefore, the new rules (explained in PS22/11: Improvements to the Appointed Representatives regime) aim at addressing the FCA’s perceived significant shortcomings amongst Principal firms in the current regime, including insufficient oversight of their Appointed Representatives (AR). 

“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,” 

Sheldon Mills, executive director  at FCA 

What are the FCA objectives?

Naturally, the primary aim is to ensure all consumer harm in such arrangements are recognised, managed and therefore avoided to the maximum extent possible.

However, The FCA's primary objectives centre on two key issues raised in the Consultation Paper on the Appointed Representatives Regime, which was published in late 2017.

These are clarification and enhancing the obligations and expectations of principal firms, and to collect more data on ARs (primarily via RMARs) so to enhance FCA supervision.

 

As mentioned above, the enhanced supervision and reporting requirements will inadvertedly result in a higher standard amongst AR, therefore a reduced risk of mis-conduct.

“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."

Sheldon Mills, executive director  at FCA 

Who is impacted?

In summary, all firms with Appointed Representatives. Whether it is insurance, investments, etc, firms who:

  • currently have appointed representatives (or IARs)

  • have intention to take on appointed representatives (or IARs)

  • are appointed representatives (or introducer appointed representatives – IARs).

The new rules.

The new rules will bring a range of new requirements to such a traditional arrangement. Firms should not underestimate the amount of work required, particularly when it comes to the internal reviews. In particular, the new rules will mean:

  • Principals will have to design and implement enhanced oversight of their ARs

  • Annual review information about the AR’s activities

  • As part of risk-management requirements, Principals (and ARs respectively) should have a clear understanding when to terminate the relation

  • Principal firms should have a clear understanding of the ARs business model and how the regulated activity fits within (along with whether this arrangement poses potential consumer detriment)

  • Appropriately assess and monitor consumer and market risk of their ARs

  • Provide an annual update on complaints and revenue information for each AR (RMAR return)

Next Steps.

Following this Policy Statement, the FCA is introducing a four-month implementation period before the changes take effect. The FCA expects firm to be aware of the updates in its rules and expectations and take all necessary steps to ensure they comply. Further:

  • Principal firms should expect to receive a section 165 data request from the FCA this year

  • The changes will take effect 8 December 2022

  • The Treasury is currently analysing the responses to its Call for Evidence and will set out next steps on its review of the AR regime in due course.

How RRCA can help!

Whether it is training, health review, audit or assistance with the overall management of the AR (eg on-boarding or AR termination), our expert consultants are here to help.

Our ethos is to help innovative and forward looking firms effortlessly manage compliance risk exposures. Helping you to focus on your passion allows sustainable growth and exceptional benefit to your clients!

 

By standing shoulder-to-shoulder with you, our industry experience and insight helps you navigate those initial hurdles; whether starting-up, growing or indeed, operating. Our multidisciplinary consultants possess deep expertise in their field, having acted as either regulators or indeed regulated individuals.

 

At RRCA, we conduct audits and reviews of a firm’s products, processes, policies, and procedures to identify scope for business, to determine the impact of regulatory developments and to verify compliance with local regulations – or indeed support firms with initial regulatory license applications.

 

Our offices in London, Brussels, and soon in Amsterdam position us strategically to work with clients from all around the world who have (or plan to have) business operations across Europe and the UK - leveraging our valuable partnerships with local, regional and international regulatory bodies.

 

 

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