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An appointed representative (“AR”) is a firm or person
who carries on a regulated activity, or activities, under the
responsibility of an authorized financial services firm. An
authorized firm that appoints representatives in this way is
referred to as a “principal.” In appointing an AR, the
principal assumes responsibility for the regulated activities
carried on by the AR that have been agreed with the AR in writing.
The appointed representatives regime dates back to 1986, but as the
perimeter of UK financial regulation has extended, the market
significance of ARs has grown. At present, some principals have
responsibility for a large number of ARs, especially in the fintech
and asset management markets.
On August 3, the UK’s Financial Conduct Authority
(“FCA”) published a policy statement on improvements to the AR
regime. The statement gives detail on responses submitted to a
consultation on the regime which took place in December 2021,
together with the final rules. The majority of the 107 responses
were supportive of the FCA’s proposed changes. The FCA has made
some amendments that take account of feedback received to add
flexibility, make it easier for firms to implement relevant
proposals, and to reduce duplication and regulatory burdens. The
details of the changes, together with minor clarifications and
updates, and the FCA’s response to the feedback received, are
set out in chapters 2 and 3 of the policy statement. The final
rules, guidance and forms are in the Appointed Representatives
Instrument 2022 (FCA 2022/32) and will come into force on December
8, 2022. Principals should expect to receive a request for data
about their ARs later in 2022.
Under the new rules, principal firms will be required to:
- Apply enhanced oversight of their 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
- Review information on their AR’s 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 they take effect.
- Provide complaints and revenue information for each AR to the
FCA on an annual basis.
The FCA has clarified that the annual review requirements can be
met by principals integrating them into existing internal reporting
processes, so long as they meet the standards set out in the rules.
The annual reviews can be conducted by individuals with a suitable
degree of knowledge and authority below the governing body’s
level. Significant issues identified at specific ARs should then be
escalated to the governing body.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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