The FCA says standards of regulatory practice among appointed representatives (ARs) are improving but there is “more to do.”

A recent review by the FCA found that too many firms take only a ‘tick box’ approach to supervision of ARs.

The FCA study found that:

• 1 in 5 principals had not carried out a required self-assessment or annual review of their ARs 

• About half of principals were not regularly reviewing their AR agreements

• A third of principals were not using data or management information to keep tabs on whether ARs were acting within the scope of AR agreements

The analysis involved a telephone survey with 251 principals and in-depth assessments of documentation from 23 firms.

The FCA found that most firms had not changed their AR onboarding or termination procedures since tougher AR rules were introduced in December 2022.

To help firms, the FCA has has set out good practice guidance and areas for improvement to help principal firms better monitor their ARs.

Tougher AR rules were introduced in 2022 following concerns that many regulatory problems were due to poor practice among ARs.

While there is still room for improvement, the FCA said it had found examples of good practice from principals included keeping clear documentation to show compliance with the FCA’s enhanced rules and using a broad range of checks and information to oversee and monitor ARs’ activities.

Jane Savidge, interim head of department for appointed representatives, said: “Some firms have been embedding our rules well, but some aren’t getting the basics right and are taking a ‘bare minimum’ approach.

“Principals must have clear, written AR agreements from the outset and effectively monitor their ARs to make sure they act within scope.”

The FCA has followed up directly with firms in the review and says it will take swift action where it sees principals not meeting its standards in the future.