Principal firms ready themselves for new rules on Appointed Representatives
What is the new development?
In August, FCA published the final rules for an improved Appointed Representative (AR) regime which apply from 8 December 2022. The new rules focus on two main themes: increasing the information principal firms need to report to the FCA and introducing new, more onerous monitoring requirements.
Importantly, these new rules expand on existing requirements so those firms who are not appropriately monitoring their ARs currently will find themselves with much more work to do to meet new FCA expectations and put themselves at greater regulatory risk if they fail to do this.
Who does it impact?
Principal firms with ARs and the AR themselves.
What do firms need to do?
To ensure firms are ready for the 8 December, some of the tasks Principal firms should have completed be in progress include:
Review the information held on existing ARs and consider if it will be sufficient to answer the FCA’s Section 165 Information Request expected in December. Firms will have just 60 days to respond, so if information is missing or out of date, principals will need to contact their ARs promptly (which could be challenging if there are multiple). To assist, ComplyCraft have prepared a template information request with questions we expect the FCA to ask which Principals can use to contact their ARs in preparation. Please reach out if this would be helpful.
Review current AR onboarding and monitoring processes and update them where required to meet the new requirements. For example, do they capture and scrutinise the ARs’ business and management in enough detail? Principals will be required to confirm that the ARs activities will not result in undue risk of harm to consumers or market integrity so the information gathered at onboarding and on an ongoing basis should be sufficient to answer this with confidence.
Review AR Agreements and make any updates needed to reflect the new requirements. For example, to address the additional notification requirements, identify any tasks or functions delegated by the Principal to its AR and possibly expand the list of events that would result in termination to include cases of concerns relating to harm to consumers or market integrity.
Prepare an annual self-assessment process that is sufficient to demonstrate how the principal is meeting its responsibilities in relation to all ARs. The process will need to be appropriately robust to identify any risks and gaps in the firm’s compliance with its obligations and must be reviewed and sign-off by the governing body every 12 months.
Update policies and procedures to reflect the new rules. This will include a firm’s internal compliance procedures as well as the manuals and operating guides provided to ARs.
ComplyCraft can help with all of the above. Please get in touch if you need any assistance.