THE FCA has published new guidance for the control of Appointed Representatives (ARs).

It said that principal firms are responsible for ensuring ARs comply with these rules.

The reason for the new rules are the number of supervisory cases caused by ARs – up to 400% says the FCA – compared with directly authorised firms.

While there is no indication that leasing broker ARs are to blame for these figures – according to the BVRLA its inspection programme demonstrates that high standards are already being met – they will still be covered by the new FCA requirements.

New rules for principal firms for supervising Appointed Representatives

  • Apply enhanced oversight of ARs, including ensuring they have adequate systems, controls and resources.
  • Assess and monitor the risk that their ARs pose to consumers and markets, providing similar oversight as they would to their own business.
  • Review information on AR activities, business and senior management annually, and be clear on the circumstances when they should terminate an AR relationship.
  • Notify the FCA of future AR appointments 30 calendar days before it takes effect.
  • Provide complaints and revenue information for each AR to the FCA on an annual basis.

The FCA added that it would undertake targeted supervision of principal firms and would increase scrutiny of those firms applying for authorisation to appoint new ARs.

Principal firms can also expect to receive a data request for information on their current ARs later in the year.

sheldon mills

While appointed representatives can bring innovation and choice, principals and ARs account for more than 60% of the total value of recent claims to the Financial Services Compensation Scheme. They also generate up to 400% more supervisory cases and complaints than other directly authorised firms.

The changes we’re making will help ensure that principals manage their ARs better – ensuring that they provide the oversight needed to avoid consumers being mis-sold or mis-led and to make sure markets can operate safely and fairly. They will also need to provide us better data and information to support our own work.

Sheldon Mills, executive director for consumers and competition, FCA (pictured right)

The FCA has appointed a dedicated new supervisory department to lead and co-ordinate its cross organisational work on ARs.

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