FCA confirms new rules to improve AR responsibilities

The FCA has outlined new rules that aim to make authorised financial firms more responsible for their appointed representatives (ARs).

The rules will help prevent consumers being misled mis-sold by ARs, and will prevent misconduct by ARs undermining markets operating fairly and safely.

ARs, which are not authorised by the FCA, can offer financial services or products under the responsibility of authorised firms, known as principals. Principal firms are responsible for ensuring their ARs comply with our rules and while some principals do this effectively, the FCA warns that many do not adequately oversee the activities of their ARs.

Under the new rules, principal firms will need to apply “enhanced oversight” of their ARs, including ensuring they have adequate systems, controls and resources, and provide complaints and revenue information for each AR to the FCA on an annual basis.

The FCA is also expecting firms to assess and monitor the risk that their ARs pose to consumers and markets, review information on their ARs’ business activities, notify the regulator of future AR appointments 30 days before they take effect.

FCA executive director for consumers and competition, Sheldon Mills, commented: “While ARs can bring innovation and choice, principals and ARs account for more than 60% of the total value of recent claims to the Financial Services Compensation Scheme. They also generate up to 400% more supervisory cases and complaints than other directly authorised firms.

“The changes we’re making will help ensure that principals manage their ARs better – ensuring that they provide the oversight needed to avoid consumers being mis-sold or mis-led and to make sure markets can operate safely and fairly. They will also need to provide us better data and information to support our own work.”

The FCA confirmed it is also working with the Treasury to explore if further changes are needed to the AR system, which would require future legislative change.

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