"The FCA has followed up directly with firms in the review and will take swift action where it sees principals not meeting its standards in the future."
- Jane Savidge, Interim Head of Department for ARs at the FCA
Following a review of how principals enforce its enhanced Appointed Representative (AR) rules - involving a telephone survey with 251 principals and in-depth assessments of documentation from 23 firms - the Financial Conduct Authority (FCA) has set out good practice and areas for improvement to help principal firms effectively monitor their ARs.
Good practice for principals includes keeping clear documentation to show compliance with the FCA’s enhanced rules and using a broad range of checks & information to monitor ARs’ activities.
Worryingly, the FCA found some firms were taking a tick-box approach to complying with its rules, relying on basic information like website checks, or using self-declarations from their ARs to demonstrate effective oversight.
The industry watchdog’s review also uncovered that one in five principals haven’t carried out a required self-assessment or annual review of their ARs whilst approximately half of principals weren’t regularly reviewing their AR agreements. Notably, a third of principals weren’t using data or management information to check whether ARs were acting within the scope of AR agreements, and most firms hadn’t changed their AR onboarding or termination procedures since the rules were introduced in 2022.
“Some firms have been embedding our rules well, but some aren’t getting the basic right and are taking a ‘bare minimum’ approach. Principals must have clear, written AR agreements from the outset and effectively monitor their ARs to make sure they act within scope,” explained Jane Savidge, Interim Head of Department for ARs at the FCA.
