FCA plans improvements to the Appointed Representative regime

FCA new Regulations 2022

In December 2021, the Financial Conduct Authority (FCA) announced plans to improve the Appointed Representatives (AR) regime to reduce potential harm to consumers and markets.

The proposed changes come after the regulator has seen a range of harm across all sectors where firms have ARs. Where harm occurs, it is often because principals do not undertake adequate due diligence before appointing an AR and from poor ongoing control and oversight.

This became a reality with the first set of changes being published by the FCA on August 3rd, 2022. This is part of the FCA’s three-year strategy to improve outcomes for consumers and markets.

The main areas of change to the AR regime are:

  • The FCA will increase consumer protection by providing additional clarity on principals’ responsibilities and our expectations of them.
  • Improved data collection will allow the FCA to intervene early, reducing consumer harm.
  • Their proposals will strengthen the oversight of ARs by principals and will lead to greater stability and resilience. This supports both their consumer protection and market integrity objectives.
  • Reduced level of misconduct and complaints across the market which will enhance market integrity.
  • Effective competition is driven by a wide variety of firms performing regulated activities. The FCA proposals will ensure the AR model can operate effectively, with firms upholding standards, and competing in consumers’ interests. They expect this will in turn raise the quality of competition across markets.

The key outcomes the FCA are seeking:

  • Principals understand their responsibilities in relation to ARs, have stronger and better oversight of, and take more effective responsibility for, their ARs.
  • Principals to provide additional details on the business of each of their existing and future ARs.
  • The FCA can better challenge firms with, and those looking to appoint, ARs.
  • Principals address problems with their ARs that are, or have the potential to, cause harm to consumers or markets.
  • Consumers can access better‑quality information on principals and ARs and make good decisions when choosing products or services.

To achieve these outcomes, the FCA first expect firms to make the necessary changes to comply with their updated rules. Once these have taken effect and with the increased focus on principals and ARs in their supervision and authorisation work, the FCA expect the potential harm they have identified to reduce.

Why The Cornerstone Network are well positioned

At The Cornerstone Network, ensuring we conduct the required due diligence on our ARs is our top priority.

Over the years, we’ve continued to develop the tools and resources we use to maintain the highest possible standard of compliance.

Through the use of our unique diligence app, we’re able to identify compliance findings early, ensuring that cases meet high standards prior to completion.  It improves consistency and provides real-time feedback to ARs. In addition, our Mainspring data visualisation tool provides a comprehensive review across our network, allowing for trend identification, problem analysis and early intervention.

We encourage our ARs to familiarise themselves with the proposed changes to make the transition as seamless as possible.

In summary, at The Cornerstone Network we have the systems and processes to seamlessly deal with the new rules because we have structured our business in anticipation of these. It should be comforting to know that being a member of The Cornerstone Network you are already complying with these new regulatory principles with minimal impact on your operations, thus we do not need to implement anything further at this time. Our aim is to ensure we are at the forefront of all future FCA rule changes, minimising the impact on our AR network members yet maintaining their integrity and true value of their businesses.