The Financial Conduct Authority (“FCA”) has issued a statement cautioning Principal firms with oversees appointed representatives (“OARs”). In its warning to Principals, the Regulator outlined its expectations in light of the challenges it has identified.
Challenges faced by Principal firms
Feedback from their consultation on improving the appointed representatives regime has highlighted the following challenges:
- Differences in legal, accounting and regulatory requirements for each jurisdiction.
- Geographical distance.
- Cultural and language differences.
Any one of these difficulties can be detrimental to a Principal’s ability to effectively oversee and communicate with their OAR, increasing the risk of non-compliance with the requirements they must uphold. The Appointed Representatives (“AR”) regime puts a significant amount of responsibility on principal firms to demonstrate they can successfully supervise their ARs.
The FCAs expectations
- Monitoring and oversight of OARs should be enhanced and proportionate in order to account for any challenges faced.
- Principals should evaluate whether customers are receiving equivalent services, protections OARs and outcomes from as those dealing with UK-based ARs (especially for those caught by the Consumer Duty).
- Where there are gaps identified between OARs and UK-based ARs, customers should be alerted to any differences.
- Principals should ensure that the activities of their OARs do not result in undue risk of harm to consumers/market integrity.
Considerations for Principals
- When completing an annual self-assessment document, firms should consider the additional risks of having OARs when assessing your controls and resources as per SUP 12.4.2(3).
- The application of the approved persons regime to OARs (including individuals within OARs performing a customer function) depends on, among other things, whether the activities are carried on from an establishment in the UK and how long individuals performing a customer function spend in the UK annually. See SUP 10A for more information.
- Principals must also ensure that AR agreements require your OARs to comply with relevant rules (SUP 12.5.5R and including, for example, the communication requirements in GEN 4.4.1R).
The overarching message for Principals is that if it becomes apparent that the challenges faced mean they can no longer adequately monitor the activities of their OARs, they should consider terminating the agreement in its entirety. Similarly, as the FCA continues to crackdown on unused permissions, if the OAR no longer carries on any regulated activity in the UK, then Principals should also consider terminating the arrangement. To notify the FCA of a termination, firms must submit the relevant form via Connect. In line with its Consumer Duty efforts, the regulator is upping its supervision of principals. It is crucial firms ensure that consumers do not face harm at the hands of their OARs or ARs.
How Complyport can help:
As experienced Consultants, we provide tailored support to Principal Firms seeking clarity and full compliance with FCA regulations.
We provide support with:
- AR and OAR applications guidance and submission
- Ongoing advisory and compliance support for Principal firms
- Consumer Duty assessment and implementation
- Policies and Procedures
- Ongoing Monitoring and Reviews
- Gap Analysis’ and Healthchecks
Don’t navigate the complex world of FCA regulations alone. Contact our team of Consultants for personalised support for your needs.
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