FCA puts restrictions on 10 principals as part of AR crackdown
The Financial Conduct Authority (FCA) has placed 10 firms under restrictions for failing to meet its expectations on overseeing appointed representatives (ARs), as part of its crackdown on the sector.
ARs can offer certain financial services or products under the responsibility of authorised firms (known as principals) but are not directly authorised by the FCA.
Principal firms are responsible for ensuring their ARs comply with the FCA’s rules.
In April last year, the City watchdog set up a new division to better supervise ARs and published its three-year strategy, which outlined its plans to “intensify” its supervision of principals and cut down “the most significant risks” of ARs.
In August, it introduced tougher rules for ARs and principals.
The FCA has also written to over 3,000 principals about their obligations to properly oversee the conduct of their ARs, and is collating data to help identify where consumers could be at risk of harm.
“We made changes because we could see a real issue with the way appointed representatives were being overseen by their principals,” said Toby Hall, head of department for ARs at the FCA.
“Consumers are at risk of being mis-led and mis-sold, with a disproportionate number of claims relating to appointed representatives being made to the ombudsman and FSCS.
“With a new department in place, and more data collected on how appointed representatives are behaving, firms should expect to continue to hear from us as we work to raise standards.”
Previous analysis by the regulator found that principals and their ARs account for more than half the total value of recent claims to the Financial Services Compensation Scheme (FSCS). They also generate up to 400 per cent more supervisory cases and complaints than other directly authorised firms, the FCA found.
The regulator has previously expressed concern over the AR/principal structure for peer-to-peer lending platforms, preventing Rebuildingsociety’s ARs from doing any new lending from February 2021.
Rebuildingsociety was allowed to reopen to ARs in September 2022, having worked closely with the regulator on the new rules.