FCA creates AR burden for networks

Excello Law Banking and Finance Partner Brendan O’Brien has provided commentary in Lois Vallely’s article for Money Marketing ‘ Extra homework – FCA creates AR burden for networks’ which reflects on the new rules for Appointed Representatives.

The Financial Conduct Authority (FCA) has introduced new rules for Appointed Representatives (ARs), which are affecting both principal firms and ARs themselves. These rules, outlined in policy document PS22/11, require principal firms to closely monitor their ARs’ systems, controls, and resources, assess and manage the risk ARs pose to consumers, and report information about ARs to the FCA annually. Additionally, networks must provide complaints and revenue data for each AR.

The rules came into effect in December 2022, and the first reviews are due to be submitted in December of the current year. The FCA is also considering further changes to the AR regime, potentially requiring legislative amendments.

Brendan O’Brien, a partner in Banking & Finance at Excello Law, noted that these changes were necessary due to a disproportionate number of supervisory cases and complaints associated with AR firms, often stemming from compliance issues in AR appointment and management. While some AR networks and regulated businesses view the changes as an increase in reporting requirements, they can typically fulfill these requirements using existing audit data.

The FCA’s decision to review the AR regime was partly triggered by the collapse of Greensill Capital, a financial services company that took advantage of the exemption from regulatory burdens provided to ARs. Complaints against firms using ARs were significantly higher than those operating independently, prompting the FCA to act.

The new rules aim to help principals manage their ARs better and prevent scandals like Greensill’s from happening in the future. Many advice networks, such as Benchmark Capital, have welcomed these changes, as they align with their existing compliance practices. Overall, the FCA’s tightened regulations seek to ensure transparency and accountability within the AR model.

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