20 June 2022
IFPR is not the only contentious acronym hitting the headlines recently. The Appointed Representatives regime (ARR) has morphed in the last few years into a controversial debate about how financial products and services should be delivered.
Whilst the FCA is finalising the rules governing its improved AR regime and setting up a dedicated unit to deal with investigations, we are gently nudging firms to kickstart a gap analysis of their current principal-AR arrangements and adopt the proposed policy early.
If you read our recent blog on the FCA’s business plan, it will come as no surprise that the AR regime is being reformed. It is a key part of the regulator’s intensified, data-led approach to supervision and assertiveness, in its continued quest to reduce potential harms within the industry and deliver good customer outcomes.
So, what will the FCA want to know about your principal-AR relationship? We fully expect firms to have to provide information about the following:
- Scope of the AR appointment
- The products and services offered against consumer needs
- Your target market
- Organisational and group structures
- Your split between regulated and unregulated activities
- Contractual personnel arrangements
- Assessments of the suitability and propriety of senior management for each AR
- Renumeration arrangements
- Sources of revenue generated for each AR
- Disclosure of information provided to consumers and financial promotions
- Systems and controls – evidence of proactivity, prevention and mitigation
- Complaints for each AR
- Access to appropriate redress
How will the data be used?
These enhanced reporting requirements will equip the FCA with a fuller picture about the nature of your principal-AR relationship and the level of risk posed to consumers and markets. It will enable standards to be realigned and determine whether firms’ arrangements are simple, or reflect more complex ‘network’ or ‘regulatory hosting’ models.
Although the onus is completely on the principal, the impact on ARs and to a lesser degree, IARs, will be felt by way of increased engagement. You are expected to demonstrate that your activities are being overseen appropriately and that you hold adequate financial and non-financial resources to run your business. You will also be required to attest to certain elements of the policy and provide the regulator with self-assessments on request.
Shaping the future
The increased breadth of AR information demanded by the FCA will determine future regulations, as well as supervision, authorisations and enforcement action. Its ability to address issues quickly and efficiently will then lead to a reduction in consumer harm.
If you need help formulating your methodology for overseeing ARs or recording your self-assessments in an appropriate document, don’t hesitate to contact us. We can also provide information and support on how to approach future interactions with the FCA. Telephone (0161) 979 0726 or email: [email protected]