FCA board approves final appointed rep rules

The board of the Financial Conduct Authority (FCA) has approved final changes to new rules for appointed representatives, paving the way for the new rules to come into force from December.

According to the regulator, the market has been broadly supportive of the new rules.

The changes are part of the watchdog’s crackdown on appointed representatives. 

The FCA said it had received a high number of responses to its consultation on proposed changes to its rules for appointed representatives, most of which supported the proposals.

The FCA Board has now approved the final rules, having discussed some minor changes at its latest meeting.

The final minor changes include reducing the pre-notification period from 60 to 30 days.

The Board added that there needs to be “clear communications” to the firms it regulated to ensure that principal firms fully understand their responsibilities for the improvements required to meet the standards set out in the rule.

The FCA will be sending out a requirement for data request to principal firms later this year to collect further information to monitor the impact of the rule changes on the market.

It will also continue to work with HM Treasury to establish whether legislative changes are needed.

HM Treasury issued a call for input on the appointed representative legislation earlier this year.

There has been criticism that ARs are sometimes poorly supervised by host firms and many issues of poor advice have been linked to a small number of appointed reps.

According to the regulator there are currently 3,400 principal firms with appointed representatives.

From December, principal firms will need to:

• Apply enhanced oversight of their ARs, including ensuring they have adequate systems, controls and resources.
• Assess and monitor the risk that their ARs pose to consumers and markets, providing similar oversight as they would to their own business.
• Review information on their ARs’ activities, business and senior management annually, and be clear on the circumstances when they should terminate an AR relationship.
• Notify the FCA of future AR appointments 30 calendar days before it takes effect.
• Provide complaints and revenue information for each AR to the FCA on an annual basis.

The new rules will not alter the fact that principals are responsible for the activities of their ARs.

The changes will affect many financial advisers who currently operate as ARs, as well as the firms who oversee them.

ARs are not directly authorised by the FCA. They can only offer certain financial services or products under the responsibility of principal firms who are responsible to ensuring the compliance of the ARs.

The FCA has previously expressed concerns that while some principals do this effectively, others do not adequately oversee the activities of their ARs. 

The regulator believes its new rules will help prevent customers being mis-sold by ARs and will prevent ARs undermining markets.

Parliament introduced the appointed representatives’ regime through primary legislation in 1986.

The new rules will take effect on 8 December.