The FCA reviewed PII documents from 269 principals, and the review found that 10% of firms needed to change their policies or business models to meet its rules.
Non-compliant cover includes firms not having the correct indemnity levels or cover that did not cover the activities of their appointed representatives (ARs) or introducer ARs.
The regulator said it had worked closely with principal firms where it identified problems and, in select cases, had temporarily stopped business activity until compliant cover was implemented.
The FCA added that principal firms should check their PII cover and ensure it is compliant with the regulator’s rules.
Jane Savidge, head of ARs at the FCA, said: “The majority of PII policies we reviewed were fit for purpose, but many principals will be leaving themselves, and potentially their customers, exposed with gaps in cover. Principals are responsible for ensuring that they hold appropriate PII cover that includes their representatives.”
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The FCA brought out enhanced AR rules in 2022 and requires principals to carry out annual reviews of each of the ARs they appoint and annual self-assessments of their ability to oversee their ARs.
The regulator said last year that there were examples of good practice, but some firms were using a “tick-box approach” to new AR rules.
