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Improvements to the Appointed Representatives Regime – Déjà vu?

Sarah Lawrence

Sarah Lawrence

Sarah has spent over 20 years of experience in the financial services industry, including over 16 years working at the Financial Ombudsman Service. Sarah specialises in customer service and complaints handling, with extensive experience of management and mediating complaints and is dedicated to passing on her knowledge and experience to businesses to improve complaints handling, customer service and consumers’ perceptions of the industry.

The FCAs planned changes to the Appointed Representative Regime take me back in time to a pre-Covid world when the PRA and FCA worked collectively to bring us SM&CR and replace the approved persons regime for most firms and individuals. At that time, responsibility/accountability for regulated individuals became more transparent and whilst the regulators intention was not to require firms to make drastic changes to their governance models, some changes were needed to the way firms operated to effectively embed the new requirements.  This included greater clarity around each individual senior manager and that which they were accountable for, more documentation and evidence of decision making and associated actions and new processes to assess fitness and propriety.

Coming back to the present day, the FCA has launched its policy approach to deliver improvements to the Appointed Representative regime due to take effect on 8 December this year (with some transitional arrangements).  When you look into the detail of what the FCA published in PS 22/11 they have clearly documented harm to consumers across all sectors where firms are operating with this type of model. They have also seen that principal firms don’t always perform sufficient due diligence before appointing an AR or have ongoing adequate oversight and controls.  Under the new requirements, the FCA will require principal firms to provide additional information and notifications regarding their ARs whilst at the same time strengthening their oversight of them.  Much of this change will be about the provision of data to the FCA as it transitions to a data-led regulator, to evidence delivery of the same desired outcome around consumer protection that was a key element of SM&CR.

Effectively, what the FCA is expecting is that Principal Firms will be required to maintain appropriate oversight of their ARs, including an annual assessment of fitness and propriety and competence and capability of senior individuals.  But surely, many will say that they should have been doing this already!

From the provision of detailed complaints data on an annual basis for each AR, plus a review of existing oversight when a significant increase in complaints occurs, the FCA is really serious about getting to understand in much greater detail the individual risks posed within an AR arrangement. Where principals are part of a wider group where SM&CR has been implemented, they will have the advantage of being able to share their practical experience with others. For those principals where these increased requirement around assessment of individuals and AR specific complaints data is new, one would hope that they will have the advantage of being able to learn the lessons of many firms that have already.

For those organisations affected by the up-and-coming changes and who might be worried about the cost and complexity of bringing together such detailed levels of information about individual ARs, then firms might want to consider undertaking a no obligation consultation with one of our team to consider the benefits of utilising RegTech, where we can discuss how our Tracsmart solution is currently helping many regulated firms effectively manage their AR populations.

Like to know more about how Worksmart can support you?… reach out to the team at info@worksmart.co.uk or book a meeting to find out how the latest RegTech can help you.

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