The FCA has warned firms with overseas appointed representatives (OARs) that they need to carry out greater supervision.

It said firms should terminate their agreements with overseas appointed reps if they, “cannot adequately monitor the activities of an OAR.”

The regulator published an update of its expectations for firms with OARs following feedback on its recent consultation on improving the appointed representatives regime.

The FCA has expressed concern in the past about the supervision of appointed reps.

It said the feedback showed that firms may have challenges overseeing and communicating effectively with their OARs because of differences in legal, accounting and regulatory requirements for each jurisdiction.

It also said that challenges arise because of geographical distance and cultural and language differences.

As a result, the FCA said it expects “monitoring and oversight of OARs to account for any extra challenges that may arise.”

It said firms must consider whether customers dealing with an OAR will receive equivalent services, protections and outcomes as those dealing with UK-based appointed representatives.

If not, firms should make sure customers are given suitable information to alert them to any differences, the FCA said.

It added: “Firms must also establish on reasonable grounds, on a continuing basis, that the activities of their OARs do not result in undue risk of harm to consumers or market integrity.”

In practice, the regulator said firms with OARs should consider the additional risks of having OARs when assessing controls and resources when completing annual self-assessment documents.

Firms must also ensure that AR agreements require OARs to comply with relevant rules.

The FCA said if firms “cannot adequately monitor the activities of an OAR, or if it does not carry on regulated activity in the UK,” it “should consider terminating the agreement.”

Last October it warned firms to ensure that they comply with new rules that strengthen the responsibilities and expectations of principals in relation to their appointed representatives (ARs).

Failure to comply will risk regulatory action, the watchdog said.