Changes to the Appointed Representatives Regime


The central tenet of the FCA’s Consumer Duty is to reduce harm to retail consumers and to encourage good consumer outcomes.  In December 2021, the FCA published CP21/34: Improving the Appointed Representative Regime to integrate the Consumer Duty into the ARR.

In its introduction to CP21/34, the FCA states: “The Appointed Representative Regime (ARR) was created to allow self-employed representatives to engage in regulated activities without having to be authorised.  Over time, it has evolved to include a wider range of business models across sectors and markets.”

As a reminder, the FCA terms a regulated firm that has appointed representatives as a Principal Firm and Principal Firms have always had responsibility for defining the products and services the AR is allowed to market on its behalf and ensuring that their ARs comply with the relevant parts of the FCA handbook, e.g. COBS, ICOBS, MCOB or CASS.

The proposed changes to the ARR aim to reduce potential harm and ensure that the regime delivers good outcomes for consumers and markets.  The FCA states that it is seeing a wide range of harm across all the sectors where firms have ARs.  This harm often occurs because principals don’t perform enough due diligence before appointing an AR, or from inadequate oversight and control after an AR has been appointed.

Although the onus is completely on the principal, the impact on ARs and to a lesser degree, IARs, will be felt by way of increased engagement. 

The FCA’s proposals:

  1. Additional information on ARs and notification requirements for principals. The objective is to allow the FCA to more easily identify potential risks within principals and ARs.  It will also help the regulator to better assess whether the principal has the expertise, systems and controls to effectively oversee its ARs and to target their supervisory interventions more effectively.
  2. Clarifying and strengthening the responsibilities and expectations of principals in the FCA’s rules and providing additional guidance for principals on their responsibilities, and their expectations of how they should act and oversee their ARs

Whilst the FCA is finalising the rules governing its improved ARR and setting up a dedicated unit to deal with investigations, Principal Firms should consider conducting a gap analysis of their current principal-AR arrangements and adopt the proposed policy early.

If you read any summaries of the FCA’s business plan, it will come as no surprise that the AR regime is being reformed.  It is a key part of the regulator’s intensified, data-led approach to supervision and assertiveness, in its continued quest to reduce potential harms within the industry and deliver good customer outcomes.

Data gathering

So, what will the FCA want to know about your principal-AR relationship?  Firms should expect to provide information about the following:

  • The scope of the AR appointment
  • The products and services offered against consumer needs
  • Your firm’s, and the AR’s target market
  • Organisational and group structures
  • Your split between regulated and unregulated activities
  • Contractual personnel arrangements
  • Assessments of the suitability and propriety of senior management for each AR
  • Remuneration arrangements
  • Sources of revenue generated for each AR
  • Disclosure of information provided to consumers and financial promotions
  • Systems and controls – evidence of proactivity, prevention, and mitigation
  • Complaints for each AR
  • Access to appropriate redress

How will the data be used?

These enhanced reporting requirements will equip the FCA with a fuller picture about the nature of your principal-AR relationship and the level of risk posed to consumers and markets.  It will enable standards to be realigned and determine whether firms’ arrangements are simple or reflect more complex ‘network’ or ‘regulatory hosting’ models.

Although the onus is completely on the principal, the impact on ARs and to a lesser degree, IARs, will be felt by way of increased engagement.  You are expected to demonstrate that your activities are being overseen appropriately and that you hold adequate financial and non-financial resources to run your business.  You will also be required to attest to certain elements of the policy and provide the regulator with self-assessments on request.

Three proposed outcomes and measures of success

In the consultation paper, the FCA articulates three outcomes they wish to see, along with how it will measure the success of the changes over time.

  1. Principals better monitor, oversee and manage their ARs. The proposals aim to clarify principals’ responsibilities for their ARs and raise oversight expectations.  Data has shown that harm can arise, for example, where principals don’t fully understand their responsibilities over ARs and so fail to oversee them appropriately.

The FCA measure will be:

  1. A better alignment of products with consumers’ needs as consumers will be less likely to choose products or services from ARs which are unsuitable.
  2. Evidence of principals more quickly and proactively preventing, and mitigating, potential harm within their ARs.
  3. Fewer complaints, and FOS referrals, involving principals and/or ARs.
  4. Consumers are able to access better quality information on principals and ARs and make good decisions when choosing products or services. As set out in the FCA’s proposed New Consumer Duty consultations, consumers’ ability to make good decisions can be impaired by asymmetries of information.  Displaying more comprehensive information on the Register and Directory can help consumers understand what business ARs are permitted to carry on.

The FCA measure will be an improved access to appropriate redress, as a result of consumers making good decisions on products and services and not purchasing from ARs acting outside the scope of their appointment.

  1. The FCA can better challenge firms with, and those looking to appoint, ARs. The FCA currently only collects data at the principal level.  The proposals will allow the FCA to gather improved data on principals and ARs’ activities through regulatory reporting.

The FCA measure will be a decrease in open reactive supervision cases against principals.  While these may increase in the short or medium term as a result of the FCA’s targeted work in this area, over the long term the FCA expects these to significantly reduce.

Shaping the future

We should expect that the increased breadth of AR information demanded by the FCA will determine future regulations, as well as supervision, authorisations, and enforcement action.  Its ability to address issues quickly and efficiently will then lead to a reduction in consumer harm.


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I am a diploma qualified, professional, well communicated person, with excellent financial services knowledge. I have a wealth of experience and understanding of financial institutions, the regulation surrounding protection, pensions, investment and mortgage advice and administration procedures. I have a depth of knowledge of the Training and Competence requirements and their application.

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