FCA consults on changes to AR regime to reduce potential harm to consumers/markets

The FCA is proposing changes to the Appointed Representatives (AR) regime to reduce potential harm to consumers and markets.

In a consultation launched today, the FCA said “while the regime has benefits, we have seen a wide range of harm across all of the sectors where firms have ARs”. It added: “Where harm occurs, it is often because principals do not undertake adequate due diligence before appointing an AR, and fro poor ongoing control and oversight. We consider there is now significant evidence of harm requiring regulatory intervention.”

The two main areas of change the FCA wishes to consult on are additional information on ARs and notification requirements on principals, and clarifying and strengthening the responsibilities and expectations of principals.

PIMFA senior policy adviser Simon Harrington commented: “The FCA has clearly identified issues within the AR model which are not working well for consumers. Given the relative size of the AR Universe, we believe that a data-led approach is the right one provided that it is proportionate.

“As we have set out previously to the FCA larger Principals, which are directly authorised already have developed oversight models of their ARs and we hope that while these proposed changes may lead to some tweaks to their model, it will not represent a huge overhaul. The challenge for the regulator is how it uses any additional data collected in its supervision and enforcement activities. It is clear from the data provided that significant harm does enter the market through elements of the AR regime.

"The regulator already collects a substantial amount of data at great financial and resource cost to the industry and we have little evidence of what it does with it. These additional requirements placed on firms who are already more than fulfilling their obligations with regards to being Principals will only be worthwhile if the bad actors in the market either reform or leave.”

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