Improving The Appointed Representatives Regime
Changes to the Appointed Representatives (AR) regime are due to come into effect on 8 December 2022. The changes affect both principal firms and their Appointed Representatives; those who have not done so already must now take action to familiarise themselves with the rules, taking steps to be ready to comply from the implementation date. The full range of new obligations are set out in Chapter 12 of the Supervision Manual (SUP 12).
Step one will be making sure that communication details – including email addresses - for principal firms given to the FCA are up to date and accurate; the first requests for enhanced data will be sent to principal firms, via Connect, between 8th and 10th December.
The FCA have set a deadline for responses to the initial Section 165 request of 28 February 2023. The data request will ask principal firms to verify the details of their ARs as they appear on the Register, confirm where the details are accurate and up to date, or report any necessary changes. This mirrors the current requirement on firms to confirm their own details; the new requirement now extends this to confirming the details of ARs.
Principal firms with more than ten ARs will be able to submit an Excel spreadsheet to make the submission easier.
The FCA is introducing the new obligations to try to improve existing oversight requirements. It has found that around 60% of the total value of claims to the FSCS are due to complaints against principals and ARs. Under the changes, principal firms will need to review – at least annually – senior management and the business activities of each of their ARs and complete an annual self-assessment of compliance with the new rules and guidance. The Policy Statement also gives principals guidance around when it is likely to be necessary to terminate a relationship with an AR, and how to wind that relationship down.
The new rules are set out in full in PS22/11but in brief, they are:
Principal firms must notify the FCA of future Appointed Representative appointments 30 calendar days before the appointment takes effect – this period is reduced from the 60 days proposed in the earlier consultation document.
Principal firms will need to provide more information on the business of their ARs, including the nature of the regulated activities the ARs will conduct – and including financial non-regulated activities.
Principal firms will need to review their ARs at least annually or where the business model or activities change or there is a significant increase in complaints. The review includes an assessment of the fitness and propriety of senior management at ARs.
Going forward, principal firms must report AR complaints and revenue data annually, up to 60 business days from the principal firm’s accounting reference date.
Principal firms will be required to notify the FCA if they currently provide, or intend to provide, regulatory hosting services.
Principal firms will – as a result of the changes – need to get to grips with the enhanced expectations of the FCA. The Statement sets out how principals need to meet the new, higher, standard and senior management, in particular, at principal firms need to be clear on their responsibilities.
The new rules require principal firms to take responsibility for their ARs, making sure safeguards are in place where functions or tasks are delegated, that senior managers at ARs are regularly assessed for competence and capability, and that controls and resources are adequate in given situations.
The requirement to review annually has parallels with SM&CR requirements, and Senior Manager Conduct Rules – particularly in delegating aspects of business and in conducting regular fitness and propriety assessments.
With principal firms now effectively responsible for the oversight of their ARs, ensuring staff at all levels are clear about their responsibilities under the Conduct Rules is more important than ever.
Our courses are designed to help staff at all levels understand what the conduct rules are, and why the new higher standards of behaviour are so important to customer treatment and FCA compliance. At the core of each course is what accountability and good conduct look like in practice, with clear explanations, realistic scenarios.
Reassurance that learners have understood the training is provided through quizzes and a final assessment.
Our training is accessed via our online portal, meaning that every staff member can take their training at a time that is convenient to them. Once training has been completed, staff can access the learning from the course following completion.
We offer two online Conduct Rules courses, which allow Senior Managers and Certification and all other staff to access and complete the training at their own convenience, ideal for those who want to complete the training in their own time, and to come back to it to refresh later on. They provide clear and comprehensive training in the Rules, including a mix of videos, small amounts of text and plenty of scenarios to demonstrate how the rules apply practically.