FCA crackdown leads to 19pc fewer ARs
There has been a 19 per cent decrease in the number of appointed representative (AR) firms over the past three years, when the City regulator began to crack down on the principal/AR model.
In a new update, the Financial Conduct Authority (FCA) said that the number of active ARs dropped from 43,000 in 2020 to 35,000 by end of the 2022-23 financial year. Around 14,000 of these are classified as ‘Introducer’ ARs (IARs), which can only undertake limited activities. Approximately 2,900 principals are active in this space.
In December 2021, the FCA proposed tougher rules for the oversight of ARs due to the “real risks of consumers being misled and mis-sold”.
The City watchdog raised concerns about a lack of proper due diligence on the part of the principal companies, and set out new rules to improve oversight in the space.
The crackdown led to peer-to-peer lending platform and principal firm Rebuildingsociety temporarily halting its AR business. The platform went on to work closely with the FCA on new rules for the AR space, which came into effect in July 2022.
The FCA has now released data from 2021 and 2022 to demonstrate the impact that the AR crackdown has had on the wider financial services sector.
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The regulator confirmed that it has set up a new AR department to lead its cross-FCA strategy on ARs and high-risk casework. It has also “supported the Treasury’s work to assess whether wider legislative changes are needed”.
“We will continue to use improved data to strengthen our scrutiny of authorisations and approvals and supervise high-risk principals more assertively,” said the FCA.
“We will use our new authorisation forms, new regulatory returns and a dataset covering all ARs from our December 2022 information requirement, which asked principal firms for information about their ARs.
“We will also undertake deeper analysis of existing data. We will use all the tools at our disposal where we see harm emerging, for example attestations for senior figures, requirements on firms, skilled persons reviews and appropriate enforcement action.”
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