The FCA has today launched a consultation on improving the appointed representatives regime and tackling harm from this model.
An appointed representative (AR) is a firm or person who carries on a regulated activity on behalf, and under the responsibility of, a firm authorised by the FCA (the principal). In appointing an AR, the principal assumes responsibility for the regulated activities the AR carries out.
The FCA is seeing a wide range of harm across all sectors where firms have ARs. This harm often occurs because principals don’t perform enough due diligence before appointing an AR, or from inadequate oversight and control after an AR has been appointed.
The FCA’s proposed changes to the regime aim to address the harm arising in this market while retaining the cost, competition and innovation benefits the AR model can provide. The proposals would improve principals’ oversight of ARs and require principals to provide the FCA with more information on their ARs, allowing the FCA to spot risks more quickly.
The FCA will also expect ARs to be more effectively overseen by their principals.
The FCA is also seeking views, through a discussion chapter in the consultation, on the wider risk posed by some of the business models operated by principal firms, and whether setting limits on such arrangements may help to reduce potential harm.
Sheldon Mills, Executive Director for Consumers and Competition at the FCA, said:
“The appointed representative model helps bring choices to consumers, but the level of harm we are currently seeing is too high. There are real risks of consumers being misled and mis-sold with little scope for recourse.
“We have already started work looking at high risk ARs and these proposals build on that work. We want to ensure that principals are properly overseeing their appointed representatives, ensuring they are competent, financially stable and delivering fair outcomes for consumers.”
In response to the FCA’s Consultation Paper: Improving and enhancing the Appointed Representatives regime, published today (3 December), Matt Connell, Director of Policy and Public Affairs of the Personal Finance Society(PFS), said: “The FCA’s work on suitability shows that the vast majority of advisers are giving very high quality advice, regardless of the regulatory regime that they operate under.
“However, given that the FCA has identified higher rates of complaints among some appointed representative firms compared to the sector average, it is right that the regulator is considering measures to address the small minority of firms engaged in poor practice and maintain a high level of trust in the vast majority of firms that are providing an excellent service for their clients.”
