Blog

What has happened?

In April 2024, the FCA assessed and publicised the key harms and drivers of harm caused by Appointed Representatives (ARs) and Introducer Appointed Representatives (IARs) that undertake credit broking.

What are the key points of the guidance?

The FCA wants to improve principals’ oversight of their Appointed Representatives (ARs) and it has provided examples of good practices and areas for improvement seen in principal firms’ due diligence checks when appointing ARs and also in their ongoing monitoring of ARs. We have set out some of these below.

This publication builds on the FCA’s Policy Statement 22/11 and its work to improve the AR regime. The guidance these examples refer to is in SUP 12: Application and purpose.

All principal firms that have ARs are being asked to consider these findings and address any gaps during their initial and ongoing monitoring of ARs. The FCA had looked at principal firms that introduce consumers to lenders or other brokers to provide finance and suggests that firms with ARs conducting other types of regulated activity will also benefit from considering the findings.

The FCA has undertaken to act where it identifies firms that do not have adequate oversight of their ARs.

Concerning the initial appointment and ongoing oversight of ARs

Firms should have robust procedures, systems and controls to ensure they conduct appropriate due diligence checks on ARs, both on an initial and ongoing basis.

Full ARs

Firms should ensure on an initial and ongoing basis that the AR:

• is solvent,
• is suitable to act for the firm, including whether it is fit and proper, and
• has no close links which could prevent effective supervision by the firm

Firms should also ensure:

• they have adequate controls over the AR’s regulated activities,
• they have enough resources to monitor and enforce compliance of the relevant requirements by the AR, and
• the AR’s activities do not or would not result in an undue risk of harm to consumers or market integrity

Introducer ARs

Firms should take reasonable care to ensure on an initial and ongoing basis that:

• an IAR is suitable to act for the firm, and
• the IAR’s activities do not or would not result in an undue risk of harm to consumers or market integrity

Initial appointment of ARs – identified areas for improvements

Some firms reviewed by the FCA did not have an adequate understanding of the full requirements when appointing ARs and/or had poor systems and controls when conducting initial due diligence before appointing an AR.

Ongoing monitoring of ARs – identified areas for improvements

Firms with poor systems and controls were not able to demonstrate effective ongoing oversight of their ARs. Some firms did not have enough resources to adequately monitor the number of ARs they either had, or planned to have, in the near future.

The FCA also found a potential conflict of interest between staff who were maintaining and developing commercial relationships with ARs while simultaneously being responsible for a compliance function involving the ongoing monitoring of the ARs. There was in this case a risk that, because of commercial interests and relationships, these staff might be unable to fulfil independent compliance obligations.

In particular, some firms could not adequately demonstrate how they were monitoring the activities of their ARs so that this did not result in undue risk of harm to consumers.

Concerning the ending of AR relationships – identified areas for improvements

Some principal firms did not check an AR’s website after termination to ensure that it no longer stated that it was an AR of the firm or that it could undertake regulated activities on its behalf.

Some principal firms were not able to explain their AR offboarding policy and did not maintain up to date policies and procedures.

Some principal firms did not notify the FCA to amend the Register immediately after terminating a contractual arrangement. This is important, to ensure consumers are not led to believe that an AR continues to act on the principal’s behalf.

How can we help you?

Thistle Initiatives has supported principal firms for over 10 years as a trusted compliance and regulatory adviser. In addition to assisting these firms as-and-when, our team of specialists can serve as your right hand in meeting and complying with FCA regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.

Are you looking for help with your AR supervision arrangements, or more general regulatory questions? If so, we can help in any of the following ways;

• Reviewing and assessing your AR supervision framework, including AR audits and the supervision of Approved Persons
• Assessing whether your AR network is operated in line with the requirements of the Consumer Duty
• Advising on suitable due diligence to be carried out on ARs
• Reviewing ARs’ financial promotions
• Advising on FCA notifications (see our blog post on this topic at https://www.thistleinitiatives.co.uk/blog/recruit-change-or-terminate-an-appointed-representative)
• Advising on the principal firm self-assessment process (see our blog post on this topic at https://www.thistleinitiatives.co.uk/blog/12-months-on-from-fca-policy-statement-22/11).

Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to info@thistleinitiatives.co.uk.