Principal firms have tightened up control of their appointed representatives (AR) as a result of the Financial Conduct Authority’s (FCA) focus on the area.
The regulator’s practitioner panel research found the majority of firms (56%) with ARs believed oversight of the sector by principals had increased in the last 12 months.
Only 1% of firms said oversight of ARs in their sector had decreased with three in ten (30%) saying it had stayed the same during the year.
The FCA has made the AR regime a key focus for its regulatory activities as it has published evidence showing that authorised firms’ oversight of ARs was not always effective.
“The FCA has already taken action to address harms arising from ARs, introduced changes via new rules and guidance to improve principals’ oversight of their ARs, increase information they give the FCA and raise standards across financial services,” the regulator said.
Business operational resilience
Its research also found that firms were becoming more aware of ensuring their operational resilience and being able to continue business during disruption.
Overall, 88% of respondents said they were aware of the FCA’s work in the area and the majority (57%) said operational resilience had become more of a priority to their firms in the last year.
Just over a third (37%) said it had not become more important.
The Covid-19 pandemic and high-profile cyber attacks have heightened awareness of keeping businesses running, avoiding harm to consumers and disrupting market integrity.
“Firms must be able to respond to, recover and learn from operational disruptions, as well as prevent future operational disruptions,” the FCA said.
“The FCA has increased efforts to deal with firms who can’t meet the new standards on operational resilience and are developing new rules to address the risk that critical third parties present to firms and markets.”
It added: “Operational resilience is the ability of firms, financial market infrastructures and the financial sectors a whole to prevent, adapt and respond to, recover and learn from, operational disruption.”
The FCA published final rules and policy relating to operational resilience in March 2021, and firms have until March 2025 to ensure that they are operating under the new rules.
These rules require firms to set impact tolerances for the maximum tolerable disruption to their critical business services, carry out mapping and testing to ensure the business can remain within these impact tolerances, and make the necessary investments to operate within these tolerances.
