In December 2022 the FCA introduced rules and guidance to improve how principal firms oversee their Appointed Representatives (ARs).
As a result of these new rules principal firms are now expected to provide much more information to the regulator about their ARs, which in turn has helped drive forward both its strategy and approach to the AR Regime.
In its latest detailed publication Improving the Appointed Representative regime through greater use of data the FCA cites how the collection of this detailed AR data has enabled it to greatly improve its understanding of the AR regime, including both the risks and the benefits.
Analysis of the data has highlighted that there are currently 2,900 principals with approximately 35,000 ARs reporting into them. The data also states the reasons for AR appointments and details about AR revenues.
The data collected has also also enabled greater scrutiny of authorisation applications and has driven an even more assertive supervisory approach by the regulator. The publication cites examples of how data has led the FCA to principals where it has intervened to prevent harm. For example, since the creation of a new AR department supervisory engagement has resulted in principals terminating their relationships with over 1300 ARs (figures from 1 July 2022 to 31 Aug 2023).
Furthermore, the publication also reminds principals of the high expectations the regulator has and what the rules mean for them. Changes to the AR regime also coincide greatly with the introduction of the Consumer Duty, as the rules supporting the AR regime and Consumer Duty reinforce each other in increasing protection for consumers dealing with ARs.
The regulator plans to continue its data-led and assertive supervision of principal firms for the rest of this year and into 2024, but is looking to test whether firms are properly embedding the new rules across the AR regime. It is also keen to increase and improve its engagement with firms and other stakeholders.