FCA Proposes to Tighten Requirements on Oversight of Appointed Representatives

The Financial Conduct Authority (FCA) has on Friday  Friday published a consultation paper, seeking certain changes to the Appointed Representatives (AR) regime in order to reduce potential harm for consumers and markets.

An appointed representative (AR) is a firm or person who carries on a regulated activity on behalf, and under the responsibility of, a firm authorised by the FCA (the principal). In appointing an AR, the principal assumes responsibility for the regulated activities the AR carries out.

Specifically, the FCA proposes to require principals to provide the following new items of information for each of their ARs:

• The primary reason for the principal's intention to appoint the AR;

• The nature of the regulated activities the principal will permit the AR to undertake (primary and secondary markets in which the AR will undertake regulated activity);

• Non-regulated business of the AR, including the nature of the non-regulated business (financial services products or services, non-financial products and services) and the proportion of the non-regulated activities compared to the regulated activities in the first year following the appointment;

• Whether the AR will provide services to retail clients;

• Whether the AR was previously an AR of a different principal, and if so, why the AR is now intending to operate under a new principal;

• Whether the AR is part of a group. If so, provide the name of the parent undertaking;

• Whether any individuals from the AR will be seconded or contracted to the principal firm to carry on portfolio management and / or dealing activities, and if so explain the rationale for entering into such an arrangement;

• Information about the nature of the financial arrangements between the principal and the AR. For example, whether the AR pays or will pay the principal commission, any flat fees, or any additional payments;

• Anticipated revenue from regulated and non-regulated activity during the first year of appointment.