Published on: 6th December 2021
The FCA has launched a consultation paper on improving the AR regime and tackling harms identified from it.
An AR is a firm or person that undertakes regulated activity on behalf of and under the responsibility of an FCA authorised firm, which is known as the ‘principal'. The principal is responsible for the conduct of the AR in carrying out the regulated activities.
The FCA has set its concerns out in a consultation paper (CP21/34) “Improving the Appointed Representatives Regime”: https://www.fca.org.uk/publication/consultation/cp21-34.pdf
The FCA has identified a wide range of?harms across?all sectors where firms have ARs, including:
The FCA are of the view that many of these harms occur as a result of principals failing to perform enough due diligence before first appointing an AR and/or then failing to properly oversee and control ARs after being appointed
There is also a discussion chapter in the consultation paper looking at the wider risks posed by some of the business models operated by principal firms. The FCA are considering whether to set limits on such arrangements to help to reduce potential harms.
Sheldon Mills, Executive Director for Consumers and Competition at the FCA, said:
“The appointed representative model helps bring choices to consumers, but the level of harm we are currently seeing is too high. There are real risks of consumers being misled and mis-sold with little scope for recourse.”
He went on to say:
“We have already started work looking at high risk ARs and these proposals build on that work. We want to ensure that principals are properly overseeing their appointed representatives, ensuring they are competent, financially stable and delivering fair outcomes for consumers.”
Solicitor Andrew Swan, Head of Regulation at Short Richardson & Forth Solicitors, commented:
“Very often we see ARs appointed quickly to take up business opportunities as they arise. However, the need for proper due diligence on an AR is imperative, as the FCA business is putting its authorisation on the line if things go wrong. Once an AR is onboard, you must do regular compliance checks on them to make sure they are working to the right standards and not going to cause you problems with the FCA.”
If you have any queries about these matters or need any assistance with supervising your ARs, drop Andrew a line at: email@example.com
Head of Regulation
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