An Appointed Representative (AR) carries on regulated activity under the responsibility of an authorised firm. The authorised firm – the principal – is responsible for making sure that the AR is fit and proper and complies with our rules.
Principal firm responsibilities
A principal firm has a range of responsibilities. Some of the key responsibilities include:
- Having a written agreement with the AR, setting out what business the AR can do.
- Assessing an AR before appointing them to ensure they are fit and proper, financially stable and suitable to carry out business for the firm.
- Notifying the FCA of the appointment of new ARs (from 8 December this must be at least 30 days before the appointment takes effect).
- Reviewing information on ARs’ activities, business and senior management regularly.
- Ensuring data on ARs is up to date and notifying us of any changes to ARs data in a timely manner.
- Taking reasonable steps to ensure ARs act within the scope of their appointment.
- Ensuring they – as principal - have the skills and resources to oversee their AR, on an ongoing basis, including if an AR business changes or expands.
- Providing complaints data and revenue information for ARs on an annual basis.
- Being clear on when to terminate an AR relationship and ensuring any terminations happen in an appropriate manner.
- Ensuring an AR continues to meet the necessary standards.
Information and notification requirements for principal firms
Information about some of the key requirements for principal firms are set out below. This is not an exhaustive list. If you are a principal firm you should ensure you are clear on our information and notifications requirements. The detailed rules and guidance can be found in our handbook.
Notify the FCA of future AR appointments at least 30 calendar days in advance
- Add ARs using our Add AR form through our online system Connect.
- The information you need to provide includes the reason for the AR appointment; the nature of the regulated business; whether any unregulated business is conducted; the anticipated AR revenue; the nature of financial arrangements between principal and AR and whether the AR is part of a group.
- You should carry out due diligence and only once satisfied that the AR is fit and proper and that you will be able to oversee them adequately should you submit the notification.
- Remember that for many firms/activities individuals will need to be approved by us for certain roles under the Approved Persons Regime before the AR can carry out its regulated activities. Individual approvals applications can take up to 3 months, so in many cases it will take longer than 30 days for an AR appointment to complete.
Notify us of any changes to information about your AR
- Tell us about changes in the types of regulated activities an AR will conduct at least 10 calendar days before the changes take place.
- Tell us about any other change to AR details within 10 business days of the change taking place.
- Report these changes using the ‘Appointed Representative or tied agent change details’ form on Connect.
Notify us of intention to provide regulatory hosting services
- There is a definition of regulatory hosting services in our policy statement.
- Where you intend to start offering regulatory hosting, you must notify us at least 60 days in advance.
- Notification should be via our Notification form (Sup 15, Annex 4).
Provide complaints data and revenue information for ARs on an annual basis
- Data is due through your regular reporting mechanism within 60 business days of your annual reporting date.
- This will be due on the first annual reporting date after 30 November 2023.
Expectations and responsibilities of principal firms
We have enhanced and clarified our expectations of principal firms. We have implemented new guidance to help principal firms understand what we expect and to meet our standards. If you are a principal firm you should ensure you are clear on our expectations and your responsibilities.
Taking responsibility for ARs
- Ensure your ARs act within the scope of their appointment.
- Ensure safeguards are in place where you delegate functions or tasks to an AR. This includes considering whether there is a conflict of interest and implementing enhanced monitoring.
- Assess senior managers at your AR(s) for competence and capability.
Apply appropriate oversight to ARs (on an ongoing basis)
- Ensure your controls and resources are always adequate.
o Take action to notify us if inadequate.
o Takes steps to address.
o Postpone or terminate AR appointments where needed.
- Reassess whether controls and resources are adequate in some situations, for example
o if ARs’ business grows significantly
o high staff turnover
o high number of complaints
o where ARs target market or scope of appointment change.
- Monitor and assess the risk of harm to consumers and market integrity.
- Overseeing ARs to comparable standard as if they were employees of the principal.
- You should be able to show you are monitoring your AR, for example by
o looking at key performance indicators. Discussing these regularly means you can spot trends and take action.
o reviewing the quality of advice given to customers
o considering training and development needs
- Ensure monitoring is appropriate to the business risks each AR presents.
Annual review of ARs
- Review each AR at least every 12 months.
- This includes looking at the fitness and propriety of senior management at ARs and their competence; the AR’s financial position; and the adequacy of the your controls and resources to oversee your AR(s).
- Keep a written record of each AR review undertaken.
- Ensure that any significant issues which arise from the AR reviews are escalated for consideration by the principal’s governing body.
- Conduct a review in addition to the annual reviews in certain circumstances including when the AR changes its business model, or the regulated activities it conducts; the AR is appointed by an additional principal; and when there is a significant increase in the number of complaints against the AR.
- Prepare a self-assessment document annually.
- It should focus on how you - as principal - are meeting your responsibilities, and identify any material deficiencies or concerns.
- This should be a single document designed to identify risks and gaps in compliance.
- It should be reviewed and signed off by your governing body, eg Board, at least every 12 months.
- It should be kept for at least 6 years and available to the FCA if requested.
- Be clear on the circumstances when it is likely to be appropriate to terminate an AR relationship, for example where the AR is unwilling or unable to resolve identified issues or where an ARs is misleading clients.
- Take reasonable steps to assist ARs with an orderly wind down where this is necessary.
- To terminate an AR you must complete the relevant terminate AR form in Connect.
Detailed guidance is in our handbook. Firms should also be working to implement the Consumer Duty in relation to their work for retail customers. This sets new rules for firms and raises our expectations for the standard of care they give their customers.
Introducer ARs (IARs)
IARs are appointed representatives who can only undertake limited activities on behalf of the principal. These activities are effecting introductions and distributing financial promotions. The principal must ensure that their IARs only carry out the activities they are permitted to do. Not all our requirements apply to IARs. For example, principal firms are required to provide less information about IARs when they notify us of their appointment. However, they are still required to apply appropriate oversight. Our rules indicate where specific rules do not apply to IARs.
Our approach to principals and ARs
- new rules to ensure principal firms oversee ARs effectively
- greater engagement with, and scrutiny of, firms as they appoint ARs, both for new applicants and firms already authorised
- targeted supervision of principal firms across the whole financial services sector, by a new AR department, using improved data and analytical tools, and
- a new fee that principals must pay for each of their ARs to help fund our work in this area