In a recent review, the Financial Conduct Authority (FCA) highlighted progress and areas for improvement in the oversight of Appointed Representatives (ARs). While some principal firms demonstrated good practices, such as maintaining thorough documentation and conducting comprehensive assessments, the FCA found that others were merely ticking boxes. Issues identified include firms neglecting mandatory self-assessments and annual reviews, failing to revise AR agreements, and lacking robust data monitoring. The FCA emphasised the need for firms to prioritise effective oversight and warned of swift action against those not meeting standards.
While many firms are embedding the new rules effectively—by keeping meticulous records and conducting thorough checks—others are merely adopting a “tick-box” approach. For instance, 1 in 5 principal firms failed to conduct the mandatory self-assessments or annual AR reviews. Similarly, nearly half of the firms hadn’t updated or regularly reviewed their AR agreements since the rule change, with many relying on outdated data and superficial checks like website reviews.
Jane Savidge, Interim Head of Department for Appointed Representatives, stressed that firms must prioritise effective oversight, starting with clear written AR agreements and comprehensive monitoring of ARs’ activities. The FCA found a third of firms were not leveraging data or management information to ensure ARs complied with agreements, risking exposure to misconduct.
The need for improvement is clear: firms that don’t align with FCA standards risk swift regulatory action. To achieve compliance, firms should implement a broader range of oversight techniques such as client file checks, customer surveys, in-person visits, and mystery shopping. The AR rules which came into force in December 2022, also require annual reviews aligned with the FCA’s Consumer Duty obligations to ensure fair value and enhanced consumer protection.
As the FCA pushes for more rigorous compliance, principal firms must step up their game. The consequences of failing to comply with these requirements can be severe, ranging from penalties to reputational damage. Firms must demonstrate a proactive, thorough approach to monitoring ARs or face regulatory scrutiny.
In a rapidly changing regulatory environment, staying compliant means embracing the FCA’s enhanced AR regime and ensuring that the principles of transparency, thoroughness, and customer protection are at the forefront of every business decision. It’s important that ARs feel comfortable that their principle firm is monitoring them effectively and providing feedback and support.
For more insights on the FCA’s review and regulatory updates, click here.
