The Financial Conduct Authority (FCA) is halving the notice period firms will need to give it ahead of engaging an appointed representative (AR) along with making several other changes to its incoming rules.
The FCA has acted in response to feedback to its AR consultation in which some respondents claimed its proposed 60-day advance notice would be too long and argued it might create business disruption.
Consequently, the regulator has reduced the pre-notification period for new AR appointments from 60 calendar days to 30 calendar days.
The regulator also revealed it is moving forward with its proposal that ensures that within 60 days of rules coming into force, principals must provide information on their existing ARs but this will be through a specific data request, not its final rules.
The FCA explained this data is key to enabling it to identify potential issues with principals and ARs. For existing ARs, the regulator will collect the data via a Section 165 data request.
Principals will then have 60 days to submit the data to the regulator on all their existing ARs. The FCA said it considers the period between publishing its policy statement and firms submitting the data gives principals enough time to compile and submit this data.
Demands for data on firms’ unregulated activities have been reduced, with the regulator only requiring data on unregulated financial business activities, not unregulated activities in other business markets.
And the FCA ditched plans to add more information on the nature of regulated activities ARs are permitted to conduct to the financial services Register.
The regulator noted that while it had received “general support” for its proposal to require principals to notify it whether they provide currently, or intend to provide, regulatory hosting services, some respondents considered the definition of ‘regulatory hosting’ was too wide and should be changed.
In response to the feedback the regulator added it was refining the definition of ‘regulatory hosting’.
The only effect of firms’ business models coming into scope of the definition of ‘regulatory hosting’ is that these firms will need to communicate their intention to provide such services in advance.
Other proposals
The FCA also issued some clarifications on some of its other proposals for principals:
- Apply enhanced oversight of their ARs, including ensuring adequacy of systems and controls, sufficiency of resources and monitoring AR growth;
- Take more effective responsibility for their ARs, including by monitoring and assessing the risk of harm to consumers and market integrity and overseeing ARs to a comparable standard as if they were employees of the principal;
- Have clarity on the circumstances where they should terminate an AR relationship and assist ARs with an orderly wind down;
- Annually review information on ARs’ activities, business and senior management;
- Principals need to prepare a self‑assessment document at least once a year, covering how they meet the requirements of the policy.
In response the FCA clarified that annual review requirements can be met by principals integrating them into existing internal reporting processes, so long as they continue to meet the standards set out in our rules and guidance.
It also clarified that the annual reviews can be conducted by responsible individuals with a suitable degree of knowledge and authority below the governing body’s level, with significant issues identified at specific ARs escalated to the governing body.
The regulator further explained that the self-assessment should focus on how the principal itself is meeting its responsibilities in relation to all of its ARs.
It is a single document designed to identify any risks and gaps in compliance with the firm’s obligations as a principal, and must be reviewed and signed-off by the principal’s governing body, at least every 12 months.
The regulator also revealed it has made some of the proposed rules in its CP guidance instead.