Half of appointed representative (AR) permission applications made by firms using the Financial Conduct Authority’s (FCA) gateway pilot did not proceed, the regulator has revealed.
It also disclosed that HM Treasury will be consulting on the AR practice in a bid to reduce “misuse of the regime” and cut consumer harm.
The FCA implemented a series of tighter controls and other changes earlier this year after raising significant concerns about how the AR regime operates across financial services.
One of the moves was more intense scrutiny of all principal firms and applicants which intend to appoint ARs, seeking permissions at the gateway.
In its annual Perimeter Paper, the FCA revealed in a small pilot of this tighter approach, 50% of firms intending to appoint ARs either withdrew their applications or they were refused by the FCA.
Other changes to the AR regime included a new annual fee of £250 per AR and £75 per introducer AR paid by principal firms to fund the FCA’s work regulating the regime.
And the FCA is also enacting targeted and proactive supervision of firms which it believes may be driving consumer harm.
“Alongside this, we will consult this year on specific proposals to address the harm we have identified,” the FCA said.
“We will also continue to work with the Treasury, who plan to issue a call for evidence on the AR regime, to determine the most effective ways to further reduce opportunities for misuse of the regime.
“This work will be informed by further data collection and our supervisory programme.”
General insurance perimeter
The regulator also identified cases among general insurers, which under FCA categorisation includes health and protection insurance, where unauthorised insurers may be offering cover illegally.
It noted there had been “situations where firms have structured the products they sell in an attempt to take them outside our remit, but where we consider those products should properly be regarded as insurance”.
In the first area of concern identified, the FCA said: “Insurance requires an undertaking to pay money or provide a corresponding benefit to a recipient.
“In some contracts, the provider claims to have absolute discretion not to pay out. But this may be in circumstances where we consider the discretion to have no real content or to be an unfair term. “In these cases, our view is that the contracts should properly be categorised as insurance.”
It also highlighted a second area of concern where insurers were mis-using warranty clauses to artificially describe repair services which are really insurance.
The FCA said it was considering amendments to its perimeter guidance on insurers and action to ensure firms were not acting illegally by providing insurance without appropriate authorisation.
Employer Salary Advance Schemes
Elsewhere in the paper, the FCA revealed that providers operating employer salary advance schemes (ESAS) were developing a self-monitored code of practice for the industry.
ESAS plans allow employees to access, usually for a fee, some of their salary before their regular payday.
The FCA said its general view was that ESAS usually operated outside credit regulation and while it had identified potential risks, the market remained very small and it had not seen any evidence of harm emerging.
“The Woolard Review did recommend that ESAS providers and major employers should be encouraged to draw up a code of best practice,” the regulator said.
“We have engaged with some of the major providers and understand that they are working towards developing a code of practice. We have asked them to keep us informed as the code develops and we will be following developments.”