The Financial Conduct Authority has said that principal firm’s oversight of their appointed representatives is improving, but is concerned that some businesses are doing “the bare minimum” to comply with its new rules.
The City watchdog’s comments follow a review after its updated good practice guidance was introduced in December 2022.
Its news rules include firms keeping clear documentation to show compliance with the regulator’s enhanced rules and using a broad range of checks and information to oversee and monitor the activities of appointed representatives.
But the FCA found that “some firms were taking a tick-box approach to complying with its rules, relying on basic information like website checks, or using self-declarations from their appointed representatives, to demonstrate effective oversight”.
Its review also found:
- One in five principals had not carried out a required self-assessment or annual review of their appointed representatives
- Approximately half of principals were not regularly reviewing their appointed representative agreements.
- A third of principals were not using data or management information to keep tabs on whether appointed representatives were acting within the scope of their agreements.
- Most firms had not changed their appointed representative onboarding or termination procedures since the rules were introduced
FCA interim head of department for appointed representatives Jane Savidge says: “Some firms have been embedding our rules well, but some aren’t getting the basics right and are taking a ‘bare minimum’ approach.
“Principals must have clear, written appointed representative agreements from the outset and effectively monitor their appointed representatives to make sure they act within scope.’
“The FCA has followed up directly with firms in the review and will take swift action where it sees principals not meeting its standards in the future.”
The regulator’s survey involved a telephone survey with 251 principals and in-depth assessments of documentation from 23 firms.
