FCA introduces new rules for appointed representatives

The UK’s financial watchdog has announced new rules to make authorised financial firms more responsible for their appointed representatives (ARs).

ARs are not currently authorised by the Financial Conduct Authority (FCA) – they can offer certain financial services or products under the responsibility of authorised firms, known as principals.

Principal firms are responsible for ensuring their ARs comply with the FCA’s rules.

The regulator said that while some principals do this effectively, many “do not adequately oversee the activities of their ARs”.

It added that the rules help prevent consumers being mis-sold or mis-led by ARs.

Under the new rules, principal firms need to apply enhanced oversight of their ARs, including ensuring they have adequate systems, controls and resources.

They will also need to assess and monitor the risk that their ARs pose to consumers and markets, providing similar oversight as they would to their own business, and review information on their ARs’ activities, business and senior management annually, and be clear on the circumstances when they should terminate an AR relationship.

"While appointed representatives can bring innovation and choice, principals and ARs account for more than 60 per cent of the total value of recent claims to the Financial Services Compensation Scheme,” said Sheldon Mills, executive director for consumers and competition. “They also generate up to 400 per cent more supervisory cases and complaints than other directly authorised firms."

Mills added: "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 mis-led 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."

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