An AR is a firm or person who carries out regulated business on behalf of a principal, or a firm authorised by the FCA. As a result, the principal takes on the responsibility of the activities the AR carries out.
According to the FCA, there has been a “wide range of harm” across all sectors that use ARs, which could be down to inadequate due diligence in appointing an AR, as well as insufficient oversight and control post-appointment.
The FCA put forward a range of proposals to improve the AR model, including enhancing oversight of them and requiring principals to provide the regulator with more information to help it identify issues faster.
As part of the consultation, it is seeking views on wider risks posed by some of the business models used by principals and what limits should be imposed to curb harm.
Potential changes include imposing a limit on the maximum size of ARs before allowing them to become fully authorised and restricting the range or scope of regulated activities they can carry out.
The consultation closes on 3 March 2022.
Sheldon Mills, executive director for consumers and competition at the FCA, said: “The appointed representative model helps bring choices to consumers, but the level of harm we are currently seeing is too high. There are real risks of consumers being misled and mis-sold with little scope for recourse.
“We have already started work looking at high risk ARs and these proposals build on that work. We want to ensure that principals are properly overseeing their appointed representatives, ensuring they are competent, financially stable and delivering fair outcomes for consumers.”
