PIMFA urges Regulator to rethink its approach to Appointed Representatives

by | Mar 3, 2022

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PIMFA, the trade association for wealth management, investment services and the investment and financial advice industry, today calls on the Financial Conduct Authority (FCA) to rethink how its proposals to improve the Appointed Representatives (AR) regime will impact on the day-to-day business of network firms who operate within the spirit and original intention of the AR regime.

In its response to the FCA’s call for evidence, PIMFA recognises there have been significant failings arising in the wholesale market – most notably the recent collapse of Greensill Capital. But we argue the application of the proposed reforms to the retail market would have the effect of burdening network firms with unrealistic data and reporting demands and largely diluting the established relationship between principal firms and their ARs.

Simon Harrington, Head of Public Affairs at PIMFA, commented: “The proposals set out in this paper interpret the role of principal firms as conduits of information rather than directly authorised bodies that the FCA has been able to outsource supervision to, in the knowledge that firms have a commercial incentive to ensure their ARs meet the standards set by them.

“In our view, the FCA has not given sufficient thought to the practical application of these proposals to firms on a day-to-day basis, which is evidenced by their assumptions in their own Cost Benefit Analysis.

“We have significant misgivings about the ability of network firms, who in many cases look after hundreds, and at times, thousands of AR firms, to be able to report on data within the required timeframe, much less their ability to provide individual self-assessments of each AR firm on an ongoing basis.

“The net effect of these proposals will, we fear, turn the governing bodies of network firms into nothing more than extremely well-paid Human Resources consultants.

“While we believe the FCA needs to rethink the application of these proposals to firms operating in the retail market, we do recognise in the FCA’s proposals a broader anxiety about the regulatory hosting model, which we share.

“However, the reality is that the proposals as written – and indeed their own definition of regulatory hosting – would have significant and detrimental impacts on network firms, who are largely already going far and beyond the FCA’s own expectations of them. We would invite the Regulator to think again and come to a compromise solution having understood the significant impacts these proposals will have on member firms.”

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