New FCA rules to tighten supervision of Authorised Representatives

The FCA has published new rules intended to make fully authorised financial firms (principals) more responsible for their appointed representatives (ARs). The updates coincide with the incoming Consumer Duty and are designed to help prevent consumers being mis-sold or mis-led by ARs.

The new rules for principal firms come into effect on 8 December 2022 and will require them to have increased oversight of their ARs’ systems, controls, and resources. Principals will need to review information on their ARs' activities, senior management and business yearly, as well as having a clear understanding of the circumstances in which they should terminate an AR relationship.

Sheldon Mills, Executive Director for Consumers and Competition, said:

‘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.'

The BVRLA’s inspection programme already shows that high standards are being met regarding the AR regime. The programme will evolve in line with the new rules to maintain those high standards.

BVRLA members acting as principals or as ARs should acquaint themselves with the new rules, with the association highlighting the following elements:  

  • Firms will not have to provide details on the nature and proportion of the AR’s non-regulated non-financial AR activities. This was a specific change requested by the industry that the FCA has responded to
  • Firms can reduce the administrative burden they face by reporting revenue in rounded bands. Firms will benefit from the transitional period that requires principals to report their AR complaints & revenue data, as well as prepare their self-assessment document, on an annual basis
  • Guidance has been updated around how members should effectively oversee and manage ARs. This includes areas including contract termination & remediation, as well as adequate control and resources
  • The FCA has given the industry welcome foresight that firms will be subject to supervisory data request on their existing ARs. This comes in later this year and firms will have 60 days to respond. The BVRLA would urge firms to check they have this data collected and ready to go in their systems
  • The FCA has proposed reasonable timeframes for information and notification requirements, although some of these are tighter than previously proposed This may make it difficult for principals to strengthen the ARs business before it begins conducting regulated activity

Full details of the changes are on the FCA website, or email [email protected] for further support.