What is an Appointed Representative?
An Appointed Representative (AR) is a firm or individual which conducts regulated business on
behalf of an FCA directly authorised firm. The directly authorised firm is known as the & 'principal' and
is responsible for ensuring the Appointed Representative meets the FCA requirements.
If I recruit an AR what am I responsible for?
Before recruitment, you should carry out sufficient checks on the firm or individual, to ensure they
are financially stable and they have achieved, and are maintaining, an adequate level of
competence.
You must notify the FCA of any appointments made and, where applicable, approve individuals
carrying out a controlling function within the AR firm, before it carries out regulated activities on
your behalf.
Once appointed, you are accountable for a range of activities including:
the products they sell and arrange;
any advice they give to customers; and
ensuring they deliver the six ‘treating customers fairly’ outcomes in the same way a directly
authorised firm would.
Can I appoint an AR that has a relationship with another directly authorised firm?
Yes, but a multiple principal arrangement would need to be in place, setting out which principal is
allocated responsibility for regulatory activities.
How frequently would I need to monitor the activities of my ARs?
This is up to you, but it should be on a regular basis; at least once a year there will need to be a
formal review. Through your monitoring you need to be able to demonstrate that you closely and
continuously supervise your ARs. This would help you to spot any errors or trends and take
appropriate and timely action to mitigate any risks to the business.
Your management information needs to cover:
1. Your assessment of the senior management at your AR(s) for fitness and propriety, which
includes competence and capability
2. Safeguards for any delegated functions or tasks, including identifying conflicts of interest
and appropriate monitoring
3. Your assessment of the adequacy of your controls and resources and where there are
weaknesses the actions to be taken which could include a notification to the FCA
4. Your assessment of the risk of harm to consumers and market integrity
5. That your oversight of your ARs is at least to the same standard as your employees
6. That you review appropriate key performance indicators, quality of advice, training records,
financial position, etc – and that you document trends and take action
Your oversight should consider how your own business and that of the AR comply with FCA
regulatory requirements. The ‘principal’ is responsible for notifying the FCA of their AR’s and any
changes within them and for indemnifying any liabilities that arise from their business.
The recruitment and monitoring process needs to demonstrate that the ARs are: fit and proper to
deal with clients; able to deliver the same level of protection to clients as if the client had dealt with
the principal itself (or the principal provides that protection itself); solvent, suitable and without
close links which would be likely to prevent the effective supervision of the AR by the Principal. You
will also ensure that your ARs have achieved and are maintaining a level of competence in order to
carry out their business.
Ending an Appointed Representative relationship
One key area is to understand how and when to terminate an AR. There are many reasons for which
ending the Principal/AR relationship but it will need to be approached carefully. The FCA will be
particularly concerned about what happens to clients – we recently had a question from them asking
what would happen if the AR didn’t obtain direct authorisation or find another Principal.
Our role as compliance consultants is to assist firms in making sure that they get things right.
The author, Vince Harvey, has worked in financial services for many years and has been running his compliance consultancy for more than a decade. His specialist areas within the Compliance Alliance are investment advice and management.
You can contact him on 07890311875 or at vince@compliancecubed.co.uk