FCA consults on improving AR regime

The FCA has published a consultation paper on improving the appointed representatives (AR) regime. It wants to combat the harm that it is currently seeing across all sectors where firms have ARs, which results from principals failing to perform sufficient due diligence and conduct adequate oversight of their ARs. FCA notes how the AR regime has developed significantly in terms of the scope of products and services it covers and, while there are many advantages to the structure, the model generates significantly more issues and complaints than from directly authorised firms alone. The report on Greensill Capital also noted how the regime is being used beyond its original purpose.

The FCA’s proposals seek to reduce the risk of harm by:

  • clarifying and strengthening principals’ responsibilities and its expectations of them in relation to their oversight of ARs; and
  • requiring principals to provide more information to the FCA relating to their ARs, including notifying the FCA of the specific activities ARs are allowed to undertake, so this can be shown on the FS Register.

In addition to the specific changes to SUP 12 that the FCA is consulting on, it is also asking for views on the risk from regulatory hosting arrangements and business models where ARs are large in size relative to the principal, and what measures should be put in place to strengthen consumer protection.

The FCA has also, in collaboration with HM Treasury, published a call for evidence to gather information on how market participants use the AR regime, and their views on its effectiveness.

The deadline to respond to both the consultation and the call for evidence is 3 March 2022.

Emma Bond