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Here to help with Regulation and Compliance

Compound Growth

25th February 2016

Principal Firms of Appointed Representatives

The FCA is currently undertaking a thematic review into the oversight of appointed representative arrangements for some parts of the industry.

In addition, following a Final Notice issued earlier this month, the FCA highlighted their concerns that there is poor understanding and scrutiny of appointed representatives and a greater need for clarity and certainty about roles and responsibilities.

Principal firms that have appointed representatives should review their own arrangements to ensure that they have fully considered their role and responsibilities when it comes to their own Appointed Representative.

Principal Firm Responsibilities for Appointed Representatives:

Principal Firms need to have rigorous management information and adequate systems, controls and resources in place to effectively select their Appointed Representatives and to allow robust supervision and monitoring of their appointed representatives in relation to practices and provision of services. It should be noted that:

o what they sell or arrange;

o any advice that they provide to customers; and

o that customers are treated fairly in accordance with FCA requirements;

Appointed Representative Risk Management

Thus to ensure potential risks to customers and the firm’s business are controlled and reduced, Principal Firms will need to have well-structured systems and controls over any and all Appointed Representatives with particular focus to:

Undertaking the above measures will help ensure that sufficient information is obtained by the Principal Firm to assess the suitability, competence and capability of appointed representatives and to monitor and enforce compliance by the appointed representatives with the FCA’s Principles and Rules.

Compliance Support:

If you would like to discuss any aspect of having Appointed Representatives,or are weighing up whether to become an Appointed Representative or applying for Direct Authorisation please call our experienced compliance consultants who would be happy to help.

Whilst the ultimate responsibility for compliance cannot be outsourced by a Principal Firm’s senior management, firms should remember that outsourcing parts of their compliance to third party services and compliance consultants can greatly assist them in the efficient running of their business and regulatory requirements.

Appointed Representatives: Principal Firm Responsibilities

Directly Authorised or Appointed Representative?

Investment adviser firms have two options when they are establishing their business – either they will need to become directly authorised by the FCA or become an authorised representative of another firm, also known as a Principal Firm.


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Appointed Representatives:

Regulator Fines Scottish Firm £101,500

“This fine should serve as a warning to firms that they need to be vigilant about what is going on at their appointed representatives - the responsibility lies with the regulated firm”

Director of Enforcement

February 2010

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