Key harms and drivers of harm caused by Appointed Representatives (ARs) and Introducer Appointed Representatives (IARs) that undertake credit broking

Summary 

The FCA wants to improve principals’ oversight of their Appointed Representatives (ARs) and it has provided examples of good practices and areas for improvement seen in principal firms’ due diligence checks when appointing ARs and also in their ongoing monitoring of ARs. We have set out some of these examples below. This publication builds on the FCA’s Policy Statement 22/11 and its work to improve the AR regime. The guidance these examples refer to is in SUP 12: Application and purpose. 

All principal firms that have ARs are being asked to consider these findings and address any gaps during their initial and ongoing monitoring of ARs. The FCA had looked at principal firms that introduce consumers to lenders or other brokers to provide finance and suggests that firms with ARs conducting other types of regulated activity will also benefit from considering the findings. 

The FCA has undertaken to act where it identifies firms that do not have adequate oversight of their ARs. 

Concerning the initial appointment and ongoing oversight of ARs 

Firms should have robust procedures, systems and controls to ensure they conduct appropriate due diligence checks on ARs, both on an initial and ongoing basis.  

Full ARs 

Firms should ensure on an initial and ongoing basis that the AR:  

• is solvent,  
• is suitable to act for the firm, including whether it is fit and proper, and 
• has no close links which could prevent effective supervision by the firm    

Firms should also ensure:   

• they have adequate controls over the AR’s regulated activities,  
• they have enough resources to monitor and enforce compliance of the relevant requirements by the AR, and  
• the AR’s activities do not or would not result in undue risk of harm to consumers or market integrity  

Introducer ARs  
 
Firms should take reasonable care to ensure on an initial and ongoing basis that:  

• an IAR is suitable to act for the firm, and   
• the IAR’s activities do not or would not result in undue risk of harm to consumers or market integrity  

Links: https://www.fca.org.uk/publications/good-and-poor-practice/principal-firms-credit-broking-permissions-good-and-poor-practice-areas-improvements