Your responsibilities as a principal when using appointed representatives (ARs).
Credit brokers can operate:
- By being directly authorised by us to carry out credit broking through their own staff.
- By appointing ARs to act on their behalf. We refer to this as acting as a principal.
Introducer appointed representatives (IARs) are a type of AR that can only carry on limited activities on behalf of a principal. This is limited to introducing consumers to the principal and distributing non-real time financial promotions. They are not permitted to carry on other regulated activities, such as explaining or advising a consumer on options for repaying or clearing a loan or hire agreement.
If you operate as a principal, you are fully responsible for making sure your ARs:
- Act within the agreed scope of activities.
- Comply with our rules.
- Deliver appropriate outcomes for consumers.
Senior employees and employees carrying out certain customer facing roles in ARs also need direct approval from us, to make sure they are fit and proper to carry out their functions. This is called the Approved Persons regime. These requirements do not apply to IARs.
Before appointing an AR
As a principal, before appointing an AR you must confirm the AR is suitable to act for you in this capacity. You must do this by:
- Notifying us in advance of the appointment.
- Having a written agreement setting out what the AR is allowed to do.
- Carrying out checks on the AR and the people who are running it.
After appointment
Once the AR is appointed, you remain responsible for the regulated activities it carries on within the scope of its appointment and for which you have accepted responsibility. You must carry out an annual review of your AR arrangements and complete a self-assessment, focusing on how you are meeting your responsibilities as a principal. This should be a single document that identifies risks and gaps in compliance and is reviewed and signed off by your governing body at least every 12 months. Annual reviews are not required for IARs, but principals of IARs must still carry out a self-assessment.
You must also submit an annual REP025 return on My FCA, providing data on the income and complaints your AR receives.
You should be clear when your AR arrangement needs to end. For example, when your annual review shows your AR is no longer suitable, or if your AR doesn’t address any issues you have identified. You must notify us if you plan to end your AR arrangement.
ARs’ responsibilities
ARs also have responsibilities. They must only carry out the regulated activities their principal has agreed and accepted responsibility for. They should follow the principal’s processes and controls, and treat consumers fairly and communicate clearly. For example, they must not give their consumers the impression that any unregulated activities they carry out are protected by regulation, or that they are directly authorised by the FCA to carry out regulated financial services activities.
Case study 9: Ensuring IARs act in the scope of their appointment
Context
Making sure that your AR acts within the scope of their appointment is an important part of ensuring that principals are fully accountable for the activities of their ARs.
Scenario
A principal firm acting as a credit broker works with IARs. The IAR’s scope of appointment is limited to introducing consumers to the principal (so the consumer can access finance to pay for the goods or services the principal provides). The IAR may only introduce consumers to the principal and share information approved by the principal.
Good practice example
The principal firm has appropriate monitoring and controls in place to ensure IARs do not act outside their limited role, such as explaining or advising a consumer on options for repaying or clearing a loan or hire agreement. This includes principals providing IARs with approved information on payment and finance options and requiring IARs to use this information exactly as written. IARs are trained on the limits of their appointment to ensure compliance with the AR agreement.
The principal strengthens oversight by reviewing consumer feedback, spot-checking calls, conducting mystery shopping, and regularly reviewing IAR websites to make sure IARs do not act outside of scope.
Why this matters
These measures help the principal to meet our expectations by ensuring IARs remain within their limited introducer role.
If an IAR goes beyond the scope of its appointment, for example by advising on, recommending, or explaining particular credit options for repaying or clearing a loan or hire agreement, this may indicate the principal has failed to maintain effective oversight under SUP 12. In these circumstances, the activity may also fall outside the AR exemption under section 39 of FSMA, potentially resulting in a breach of the general prohibition, which is a criminal offence.
Case study 10: Using publicly available information to oversee ARs (including IARs) and reduce the risk of consumer harm
Context
Proper oversight of ARs is a vital aspect of acting as a principal – to spot and rectify issues where they arise, to ensure consumers continue to receive good outcomes.
Scenario
A principal firm acting as a credit broker wants to oversee its ARs. It wants to use publicly available information to do this, to identify early signs of poor service or potential consumer harm.
Good practice example
The principal regularly reviews online feedback, such as online reviews, Trustpilot ratings and social media posts to identify consumer dissatisfaction or harmful practices that may not yet have resulted in complaints.
The principal also reviews Companies House records to understand ownership, directors and people with significant control, and monitors connected individuals and associated companies to identify wider governance or conduct risks.
It carries out risk‑based checks on these individuals to see if there are any signs of past business failures, regulatory problems or links that could create a risk of harm to consumers. If it finds any suggestions of these, it investigates the impact on consumers and takes timely action such as providing additional training, correcting unclear consumer information, or intervening with a specific AR.
By monitoring linked individuals and companies, the principal develops a broader view of how consumers experience the distribution chain and can identify risks earlier.
Why this matters
Using publicly available information such as real‑time consumer feedback, online reviews, and Companies House data helps principals to spot risks sooner, intervene more quickly and reduce the risk of consumer harm.
Where these requirements come from
The requirements in this section may change, depending on government proposals for reform. This likely includes replacing the Approved Persons regime for ARs (covered in SUP 10A, below) with SM&CR requirements. This would be implemented alongside phase 2 of our review of the SM&CR in the second half of 2026, subject to the Government’s proposed legislative reforms being taken forward.
