As The Principal firm, Do You Know What Your Appointed Representatives Are Doing?

The FCA’s review of the use of Appointed Representatives (AR) is one of its current priorities, with increased levels of harm across all sectors by ARs being noted.  Therefore in the next couple of months expect actions to occur, as set out in our recent article.

The FCA has also continued to be active in the field of defined benefit pension transfers, notably with the British Steel scheme but also in its general approach to the DB pension transfer market, with which we know the FCA is generally unhappy and which has consistently demonstrated lower levels of suitability than would be desired.  The FCA has been vocal in its condemnation of certain firms and their practices in the area of DB pension transfers and these comments have built on the FCA’s general toughening of its approach to the whole of the DB pension transfer market.

These two factors have recently combined with, as we understand, the liquidation of a wealth management firm brought about in part by the Financial Ombudsman Services upholding 13 complaint cases against the firm.  The cases all having been advised on by an appointed representative of the firm.

The transfers related to transferring DB pension benefits to SIPPs, which then were invested into unregulated investment schemes and illiquid assets.  These were deemed to be unsuitable for retail investors hence the upholding of complaints against the AR and the firm.

Notwithstanding the obvious concerns over DB pension transfers, this example brings to the fore a couple of important issues:

  • Principal firms need to fully understand their role and monitor their ARs closely, as they are bearing all of the risk during the process; and
  • As we know, senior managers are responsible for what happens in their firms.  So senior managers will find that the FCA can more readily ascertain who in the firm is responsible for the pension transfer advice, whether this is by the firm itself or by its ARs.  Therefore, they must ensure that they understand what is happening in their areas of responsibility, have adequate management information reporting and must put in place appropriate mechanisms to manage any risks arising.

Having both appointed representatives and pension transfer permissions is a potentially explosive combination but it does not need to be catastrophic for the firm.  Having the right checks and balances, appropriate monitoring of both staff and ARs, and controls over high risk business activities can provide the necessary comfort to the senior management echelon.  Any combination of system weaknesses, out dated controls, regulatory lethargy and management inertia can lead to problems, problems that can readily be avoided by appropriate planning and review.

Now is the time to act to ensure that tomorrow’s standards are appropriate to meet regulatory expectations.  Do not delay.

How can Complyport help?

If this article has raised any questions or you think your firm may require assistance, please contact Jonathan Greenstein now, via jonathan.greenstein@complyport.com, and book in a free consultation.

Our teams are ready to support your firm in assessing your AR structure, reviewing supervision and oversight provisions, terminating AR arrangements and more.

About Complyport

Complyport is the City’s market leading consulting firm supporting the UK financial services industry for over 20 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.

Complyport advises and assists firms to become authorised and to comply with the rules and requirements of regulators on an ongoing basis. Our vision is to be there for our clients every step of the way, helping them change, grow, and excel through expertise, insight, and innovation, and in so doing to become our clients’ most valued supplier and trusted advisor.

We have successfully assisted over 1000 firms to become authorised with the FCA and EU and are providing regulatory support to over 600 regulated firms on an ongoing basis globally. With presence in the UK and EU, as well as via our Associates Network, Complyport can assist firms across multiple jurisdictions.

Complyport’s multidisciplinary consultants possess deep expertise in their field, having acted in FCA skilled person reviews, as expert witnesses in legal cases and as expert investigators for firms or their legal advisers.

Day to day, we conduct audits and reviews of a firm’s products, processes, policies, and procedures to identify scope for business, to determine the impact of regulatory developments and to verify compliance with local regulations. Our clients tell us we live our values; we are driven, agile and collaborative.