Find what you need to do if you're a principal firm operating as a regulatory host.
A regulatory host[1] is a principal firm that typically carries out little or no regulated activity. Instead, it oversees the use of its permissions by appointed representatives (ARs). This service is commonly marketed as an additional service alongside other compliance support services.
Regulatory host firms can oversee a wide variety of AR business models and may not share common commercial objectives with their ARs.
Risks and opportunities of regulatory hosting
There are some benefits of regulatory hosting services for firms, including quick and effective access to financial markets. However, there are also potential challenges with the model, such as:
- Principals applying too little resource to overseeing ARs.
- A lack of skills and experience in the different markets in which their ARs operate.
- A lack of systems and controls to allow principals to effectively oversee their ARs.
Notification of regulatory hosting
You must tell us in advance if you intend to start operating as a regulatory host by completing a ‘Sup 15, Annex 4' notification form through Connect[2].
Responsibilities for regulatory hosts
You must take steps to ensure you will be able to meet our standards.
Your firm must ensure it applies sufficient resources to oversee its ARs in line with the risks posed. This includes ensuring that it has the knowledge and experience to oversee the AR activities, especially when ARs are operating in different markets.
This may include regular meetings and reviews of management information and data to identify risks and issues. It can also involve auditing files and other measures to ensure ARs continue to meet our requirements.
If you are involved in wider activities and/or have other business commitments, this may enhance the need to consider if enough resource is being applied.
You remain ultimately responsible for overseeing your ARs even where monitoring or compliance activities are ‘outsourced’.
Read more about your responsibilities as a principal firm[3].
