The proposed changes to the FCA’s Appointed Representative regime




What is an Appointed Representative (AR)?


Being an appointed representative enables a business to engage in regulated financial activities without having direct authorisation (license) from the FCA. Instead, such a firm can provide regulated services under another regulated company. This would be regarded as the principal firm.


The FCA is looking to overhaul the way appointed representatives are supervised. The focus is now on principal firms to ensure that they understand their responsibilities in relation to ARs, have strong oversight and have better responsibility in managing appointed representatives (ARs). Another key driver behind this is the aim of developing consumer confidence and enabling them to access better information in making better decisions when choosing products and services. This is also aligned with the new Consumer Duty outcomes



Appointed Representatives (ARs) and information and notification requirements


At present, the information principal firms are required to provide to the FCA is limited. The FCA is proposing that it obtains better and more timely information in order to have better oversight, especially in understanding risks and managing interventions more effectively.


Below is the FCA’s proposed data collection from principals on their ARs.




The FCA expects principal firms to have good knowledge of their ARs’ business models whilst understanding the range of activities that the Ars undertakes. This includes both regulated and non-regulated financial activities so that it can best identify and manage risks, particularly harm to customers.



Reporting significant changes


The FCA is proposing to require principal firms to report changes to the information they provided on their ARs. This is to ensure that the data held is both accurate and up to date and allows the regulator to identify any potential issues, particularly harm to consumers, early on. Principals are required to notify the FCA of such changes within 10 business days of the change being made (SUP 12.7.7R).

At present, principals are required to notify the FCA within 60 days before an appointed representative appointment is made. The FCA is proposing to change this timeframe to 30 days.



Requirement for principals to provide complaints data on their Appointed Representatives


The FCA is proposing that principals submit complaints data for each of their AR, annually. This will enable the regulator to better identify potential problem areas and weaknesses in the principals’ oversight of their ARs. The FCA is proposing that firms submit this data within 30 business days of the principal’s accounting reference date.



Requirement for principals to provide revenue information on their Appointed Representatives


The FCA is proposing that principals submit revenue data on each of their Appointed Representatives (ARs) annually and split by revenue from regulated and non-regulated activities. This information is proposed to be provided within 30 days of the principal’s annual reference date.



Summary of the final rules on AR data and notification requirements





Fit and proper expectations for principals


The FCA is proposing that principal firms:

  • assess the competence and capability of individuals at ARs. This assessment should take into account whether the skills, experience and training of the senior management are sufficient to perform their duties and provide regulated financial activities. This assessment is expected to be made annually.

  • assess the fitness and propriety of individuals at the ARs, ensuring that the principal is able to verify the information provided by the ARs.


Effective oversight of Appointed Representatives (ARs)


Principals are required to ensure that they have adequate controls over the AR’s intended regulated business activities, and resources to monitor and enforce an AR’s compliance effectively. Principals are also required to ensure that their governance, risk and compliance functions, organisational structure and non-financial resources (e.g. people, technology, processes and facilities) are tested annually. These controls and resources must also be commensurate to the size of the AR’s business and activities.


Where a principal firm identifies issues with an AR, it must fix the issue as a matter of urgency and notify the FCA under Principle 11. Where a principal has identified concerns following an oversight appropriateness review, it must fix any issues or terminate its relationship with the appointed representative in question.


Triggers for review of oversight appropriateness include:

  • a significant increase in complaints received by the principal about the AR

  • a change in the AR’s target market

  • a change in the AR’s scope of appointments


Annual review of AR’s activities and business for fitness and propriety of senior individuals within the AR


The FCA is proposing that principal firms undertake a review of their ARs’ activities and business at least once a year. The review should include:

  • the fitness and propriety of senior individuals at the AR, particularly their ability to carry out the regulated activities

  • the ARs’ financial position

  • the adequacy of the principal firm’s controls and resources for effective oversight management of the appointed representative


Annual reviews of Appointed Representatives and Self-Assessment




Summary of the final rules on AR data and notification requirements






How Buckingham Capital Consulting can help


Buckingham Capital Consulting is a leading regulatory consulting firm, specialising in payment services, electronic money, banking, and consumer credit. We are able to advise firms on the best course of action and strategy based on their business plan and financial product or service. We can help firms with licensing, compliance, operational setup and related services.


Buckingham Capital Consulting can advise you on how best to meet the FCA's new requirements for principal firms as well as appointed representatives (ARs). We can help you become an appointed representative with a principal firm. For more information, visit our website at www.buckinghamcapitalconsulting.com, email us at info@buckinghamcapitalconsulting.co.uk or call us on (44) 0207 866 2512.


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