Appointed Representative and Principal Firms
An Appointed Representative (often referred to as an “AR”) is a firm or individual that, due to a formal relationship it has with an FCA authorised firm, can conduct specific regulated activities without themselves being authorised by the FCA to do so.
Appointed Representatives are not authorised by the FCA. Instead, they are registered with the FCA by an authorised firm that, in this context, is referred to as a ‘Principal Firm’ or just ‘the Principle’.
Through their relationship, the Principal allows the Appointed Representative to conduct certain regulated activities that the Principal is authorised by the FCA to undertake. The Principal is responsible for the compliance of the Appointed Representative, and therefore, it’s common for the Principal to charge the Appointed Representative for their ongoing relationship.
Principal Firms are responsible for establishing the suitability of an Appointed Representative before appointing them, applying and seeking permission for the appointment of an Appointed Representative and maintaining sufficient oversight of each Appointed Representative’s compliance with the FCA’s rules. Principal Firms must also ensure that the ongoing appointment of the Appointed Representative does not adversely affect their ability to comply with the FCA’s rules, including the threshold conditions.
Many directly Authorised firms first start as an Appointed Representative. It enables the AR to gain relevant experience before seeking direct authorisation. There are two types of Appointed Representative – Appointed Representatives and Introducer Appointed Representatives (often referred to as an “IAR”). The key difference is that an Introducer Appointed Representative is able to conduct the regulated activity only insofar as it enables them to either make an introduction to the Principal Firm or another firm in the same group as the Principal or to issue financial promotions (which, in layman terms, are essentially adverts relating to an FCA regulated activity).
As Introducer Appointed Representative’s are restricted in what they can do, it generally carries less risk of non-compliance and therefore the registration process is shorter.
An Appointed Representative on the other hand is able to conduct the regulated activity in their own right and is not limited in the same way as an Introducer Appointed Representative. However, similar limitations can be implemented within the agreement required to be appointed by the Principal. Failure to comply is then a breach of the agreement, and not a compliance breach by the Principal Firm.
You can read more about being an Appointed Representative on the FCA website or by downloading our free guides below.
Please note that Conducting regulated activities without the correct authorisation is a criminal offence as it would breach Section 19 of the Financial Services and Markets Act 2000, often referred to as the General Prohibition. Speak to one of our experts today for confidential and no obligation advice about claims management authorisation.
Approved Persons and Controlled Functions
Controlled functions are designated to individuals within a firm who is an Appointed Representative (AR) (other than Introducer Appointed Representatives) of an FCA authorised firm or ‘Principal firm’.
A Control Function may only be held by someone who has been approved by the FCA and are typically understood to be ‘Approved Persons’.
Due to the implementation of the Senior Managers & Certification Regime (SM&CR), the Approved Person Regime no longer applies to FCA regulated firms, but it still applies to their Appointed Representatives. This also means that SM&CR does not apply to Appointed Representatives.
From December 2019 and as a result of SM&CR, a large number of controlled functions were removed for AR, with the remainder typically associated with executive positions e.g. for a director of an AR.
Approved persons have to meet the FCA’s fit and proper person requirements and must comply with the approved persons conduct requirements. More information on these matters can be found on the FCA website or by downloading our free guides below.
Approved persons at Appointed Representative firms do not have to apply to the FCA themselves, the Principal firm should do this for them. The Approved Persons(s) for an AR will be entered into the FCA public financial service register.
Individuals holding a controlled function can be held personally accountable by the FCA and in the event of failings this can lead to personal fines that the individual themselves must pay.
How can Scott Robert Help a Principal Firm?
Scott Robert has a long history helping both Principal Firms looking to onboard an Appointed Representative and Appointed Representatives seeking direct authorisation themselves. If you are an Appointed Representative that wants to become authorised, please see our authorisation section. If you are an Appointed Representative or want to become one and would like some advice, or to learn more about being an Appointed Representative, please contact us today.
As a Principal Firm, or one who is considering becoming one, you should be aware of the risk that is involved with having one or more Appointed Representatives. Rest assured that our expert advisers at Scott Robert are here to help. We can assist you with any part of the journey, whether you want to talk about what the onboarding process involves right through to helping you monitor the compliance of your Appointed Representatives.
To name just a few, we can help you by:
- Identifying which form of Appointed Representatives a proposed or current Principal firm may require I.e. Appointed Representatives and Introducer Appointed Representatives.
- Advising on the FCA’s rules as applicable to each form of Appointed Representative and the specific rules and requirements to meet before the appointment of an Appointed Representative.
- Establishing a framework for onboarding of an Appointed Representative to help ensure that your firm appropriately onboards them.
- Creating and implementing a Compliance Monitoring Framework for your firm to utilise once an Appointed Representative has been onboarded. This helps Principals to comply with relevant FCA rules on an ongoing basis.
- Completing online applications to the FCA to register and seek approval for an Appointed Representative.
- Conduct ongoing monitoring reviews and audits to provide compliance monitoring feedback and management information to help ensure you maintain appropriate oversight over the activities of your Appointed Representatives.
If you want to know more about becoming a Principal Firm, speak to one of our experts today by calling 0161 413 2796 to find out more.