The effects of the enhanced FCA Appointed Representative Regime

Steve Walton writes

The effects of the enhanced FCA Appointed Representative Regime are evidently reverberating across the sector, especially as the deadline for Principal firms to complete their annual AR reviews and self-assessment has now passed.

Add in to the mix the continued consolidation of independent brokerages the AR’s who found themselves attached to the seller are left in a position where their livelihoods and clients are impacted.

What has become apparent is that this regulatory shift has prompted certain Principal firms to re-evaluate their position. Consequently, they have taken proactive measures to position themselves accordingly.

However, this prompts a crucial question:

Steve Walton

What is the impact on the Appointed Representatives (ARs) themselves and how are their clients being affected?

Recent observations reveal that some Principal firms have opted to terminate agreements with several ARs, citing a diminishing appetite for the AR model. In some instances, these terminations have occurred abruptly, with a noticeable reluctance from the Principal firms to work with the impacted ARs in facilitating an orderly exit.

This has left several ARs in a challenging position, unable to trade, and, in some cases, receiving as little as 30 days’ notice of termination. The pressing concern here is how these abrupt changes are impacting customer support.

The importance of ARs carefully selecting their Principal firm cannot be overstated.

A reputable Principal will have a robust selection, onboarding, and continuous oversight process to ensure a harmonious match between the AR and Principal business models. This not only ensures suitability but also mitigates the risk of future misalignment.

Where it is necessary to sever relationships, a quality Principal will work with the AR, so appropriate wind down the AR business operation can be completed, whilst ensuring that the end customer is fully supported at all times.

The current landscape underscores the necessity for ARs to thoroughly understand their Principal firm’s appetite for the AR model. The increasing impact of the new FCA Appointed Representative regime is finally resonating with some Principal firms, and decisions to reduce AR exposure or withdraw from the AR model altogether could have significant and immediate implications for ARs.