In August 2022, the FCA confirmed in its Policy Statement PS 22/11 new rules to make principal firms more responsible for their appointed representatives.
The FCA emphasises in the PS that principal firms are responsible for ensuring that their ARs comply with the FCA’s rules and that while some principals do this effectively, many do not adequately oversee the activities of their ARs. The new rules are intended to help prevent consumers from being mis-sold to or misled by ARs and to prevent misconduct by ARs from undermining markets operating fairly and safely. 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 oversight similar to that provided in 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 any future AR appointment 30 calendar days before it takes effect, and
• Provide complaints and revenue information for each AR to the FCA on an annual basis.
As part of its three-year strategy to improve outcomes for consumers and markets, the FCA is also undertaking targeted supervision of principal firms using improved data and analytical tools to focus its work. It’s also increasing scrutiny on principal firms applying for authorisation and as they appoint ARs. The regulatory hosting model in particular will continue to receive FCA scrutiny, as will principals’ and ARs’ preparation for the implementation in 2023 of the Consumer Duty.
As part of improving the data provided to the FCA, principal firms should expect to receive a Section 165 data request for information on their current ARs later in the year.
These changes will take effect on 8 December 2022 following a four-month implementation period. The FCA has put in place transitional arrangements to give firms more time (one year) to comply with some of the new rules, particularly those requiring them to submit information on an on-going basis and to review their ARs and self-assess annually.
If you’d like to know more about how we can help you with your Appointed Representative oversight arrangements, or any other regulatory compliance issues, our specialist team is here to help.
Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.