The FCA published its much-anticipated Policy Statement on "Improvements to the Appointed Representatives regime" (PS22/11) on 3 August 2022. This Policy Statement follows the FCA's Consultation Paper on the same topic (CP21/34), published in December 2021. Feedback on Her Majesty's Treasury's (HMT's) related call for evidence on the appointed representatives (AR) regime is still awaited.
The FCA's changes will come into force with limited transitional relief on 8 December 2022. All firms using AR arrangements will need to assess the new rules and guidance, and what steps they need to take to comply with them, as a matter of priority.
Although the FCA is not, at this stage, fundamentally changing the fabric of the AR regime, the changes being introduced under the Policy Statement will nonetheless have a material impact on principal firms and (potentially significantly) increase their regulatory compliance burden.
These new rules may require principals to introduce new systems, controls and procedures in relation to their ARs, apply additional resources to their AR arrangements and in many cases, amend their contractual agreements with ARs. Principals should assess the changes and prepare to comply with the new rules now.
The changes apply to all firms with ARs (including tied agents), but not firms in the Temporary Permissions Regime (TPR) or the Financial Services Contracts Regime (FSCR), which remain subject to separate rules. The same rules apply whether or not the AR is an affiliate of the principal.
Subject to transitional provisions for certain changes, the new rules and guidance will apply from 8 December 2022.
The new rules and guidance under the Policy Statement broadly fall into three categories:
- New FCA notification and reporting requirements
- Enhanced principal oversight of ARs
- New requirements for the AR agreement
Principal firms will need to follow new processes in relation to the collection and notification of data and oversight of their ARs. The FCA's expectations are clear and substantial.