Enhancing the Appointed Representative Regime
The key focus of these rule changes is to ensure that Principal firms better understand their responsibilities in relation to ARs; have sufficient knowledge, understanding and oversight of their ARs; whilst also implementing an assurance process over their own oversight of ARs. In addition, the FCA, with its increased focus on data-led supervision, will push for better data gathering and analysis of Principals and their ARs.
To briefly summarise, the Policy Statement requires Principal firms to:
- provide the FCA with at least 30 calendar days’ notice before appointing an AR;
- subject to a FSMA s.165 information request (not written into rules), the Principal must provide the FCA with information on their ARs within 60 days of rules coming into force. Principal firms should ensure that their contact details are up to date, as the information request will come via email;
- establish a process that prior to appointing an AR, the Firm makes an assessment on whether the AR’s activities may result in an undue risk of harm to consumers or market integrity, even where the Principal and AR are part of the same group. This process should also be carried out on an ongoing basis.
- notify the FCA of their intention to provide Regulatory Hosting services (defined in the updated Glossary), unless the Principal is already providing such services;
- notify the FCA of any non-regulated financial activity carried out by the AR;
- carry out, at least annually, a review of an AR’s business model, activities, senior management oversight and revenue;
- confirm that the details of their ARs on the FCA Register are correct, annually within 60 business days of the Principal firm’s accounting reference date; and
- undertake a self-assessment of the Principal firm’s oversight and understanding of their AR population.
These new rules come into effect, following a four-month implementation period, on 8 December 2022.
With the implementation timeline already short, we can support Principal Firms to meet this deadline. We can also support Principal Firms with a RegTech solution to help manage and evidence control over their AR portfolio, giving ongoing, demonstrable oversight as well as meaningful data on each AR, which can help Principal Firms deliver to the FCA’s requirements efficiently and effectively. Please contact us for more information.