Vida FatemiFollowing the introduction of rules and guidance on how to improve how principal firms oversee their ARs in December 2022, principals must now give the FCA more information about their ARs. This information is used by the FCA to drive their strategy and approach.
FCA has now published data from the 2021 and 2022 data requests sent to principal firms and the authorisation information collected from them, along with outlines of how they are improving the ARs regime and their expectation of firms.
Key areas of concern highlighted in the report include:
- The use of IARs which FCA stresses should be limited in scope and firms should consider what checks might be appropriate to ensure this;
- The challenges with appointed IARs including difficulties in understanding and managing legal, accounting and regulatory requirements for each jurisdiction and potential complications due to geographical distance and cultural and language differences;
- A minority of principals not holding adequate PII cover for all activities of their ARs, holding incorrect policies that did not cover ARs and had significant exclusions that greatly limited cover; and
- Some principals not having adequate controls over AR’s activities and resources to monitor and enforce an AR’s compliance with the relevant requirements that apply to its regulated activities.
FCA further emphasised the need for firms to comply with the new rules outlined in its 2022 Policy Statement. The new rules included:
- Applying enhanced oversight of ARs, including ensuring having adequate systems, controls and resources;
- Annual self-assessment which involves preparing a single document demonstrating compliance with obligations as a principal, identifying any risks and gaps;
- Annual review of information on the ARs’ activities and business;
- Review of whether oversight approach remains appropriate in certain situations;
- Notification to FCA of intended AR appointments;
- Providing complaints and revenue information for each AR to FCA on an annual basis.