Introduction
On 8th December 2022 the Financial Conduct Authority (“FCA”) set out new rules and enhanced expectations for Principal firms in PS22/11. For more information on the changes made by PS22/11, take a look at our previous article; New FCA Rules to Tighten up the Appointed Representatives Regime with PS22/11.
Fast forward to September 2024 and the FCA has now conducted a review of Principal firms and their practices against the new rules and expectations. It has now provided feedback to the industry on its website highlighting good practice and areas for improvement identified during the Review. These insightful pieces produced should be reviewed by Principal firms and used as an opportunity to review their internal appointed representative (“AR”) procedures and, where necessary, to amend their practices to ensure the good practice standards identified are adopted and any poor practices are amended.
It should be noted that, in the majority of cases, the FCA observed good practices and only a minority of firms demonstrated poor standards in any one area assessed. For a high level summary of the Review and its results please read our recent article here.
The Review
The Review conducted consisted of testing a sample of 270 Principal AR firms (around 10% of the Principal population). In addition, 23 Principal firms were randomly selected for in-depth assessment, looking at documentation and information held by firms in regard to their annual reviews and self-assessments.
The Review focused primarily on Principal firms’ completion of annual AR reviews and self-assessments, alongside whether any challenges were faced in the completion process of the new RegData return, REP025. Further areas considered in this Review have included:
- Monitoring, oversight and acting out of scope;
- Approach to onboarding ARs; and
- Termination, offboarding and orderly wind-down.
The FCA’s Guidance
The FCA has highlighted some good and poor practice examples for firms to consider when reviewing and improving their own frameworks to further align with the FCA’s expectations. These are spread across the above areas and include the following:
| Good Practice | Areas for Improvement |
| Self-Assessments: | |
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| Annual Review: | |
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| Monitoring, oversights and acting out of scope: | |
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| Approach to onboarding ARs: | |
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| Termination, offboarding and orderly wind-down: | |
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Good Practice
These selected examples provide an insight into the FCA’s expectations and areas for firms to consider. The good practice examples provided throughout the report should be used by firms to cross reference with their own practices to ensure that they have appropriate systems in place that meet FCA expectations. If a firm feels that its framework does not align with example of good practices, consideration should be given regarding ways to adapt its framework to fall in line with the FCA’s expectations.
Areas for Improvement
Coupled with the good practice element of the report the FCA has provided Principals with areas to focus on regard to their frameworks. The examples provided allow a targeted approach for firms to begin reviewing their developed frameworks and allow adjustments to be made with the feedback from the FCA. Such information being available leaves no Principal with an excuse to not develop robust frameworks moving forward.
Next Steps
Principal firms or those firms considering taking on ARs should consider the good and poor practice information provided by the FCA. The information provided should be used to assess current or future processes to ensure that they are robust and in line with expectations. The FCA has also indicated that it will continue to monitor compliance with the rules, paying particular attention to the focus areas of annual reviews, self-assessments and AR oversight, indicating that firms should ensure that these areas particularly fall in line with the identified expectations.
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 Introducer AR applications guidance and submission;
- Ongoing advisory and compliance support for Principal firms;
- Consumer Duty assessment and implementation;
- Policies and Procedures;
- Ongoing Monitoring and Reviews; and
- Gap Analysis’ and Healthchecks.
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