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Compliance Portal
September 9, 2024
The FCA set out its new and enhanced rules and expectations in a new AR regime effective from December 2022. The FCA has now tested some 270 firms, either in a telephone conversation or in a more in-depth and focussed assessment, asking about reviews and self-assessments; and the challenges in completing the new annual regulatory return on Appointed Representatives complaints and revenue (the new REP025). The more in-depth assessments involved calls with firms and a review of information and documentation, such as annual reviews and self-assessments.
The FCA also asked Principals about their AR oversight, the scope of AR activities, onboarding and termination processes, monitoring, and delegation.
Both samples were randomly selected to include Principals with different numbers of ARs and from a range of portfolios across different financial sectors.
Overall, Principals have made some effort to comply with the new rules, but not all Principals could show they had undertaken an adequate annual review or self-assessment covering all of the points set out in SUP 12.6A:
- 96% of Principals said they were very confident they were effectively implementing the new rules and guidance.
- However, 1 in 5 firms had not done the required checks (self-assessments, annual reviews).
- The quality and completion of self-assessments and annual reviews requires improvement.
- 4 in 5 Principals had completed either annual reviews or self-assessments, and approximately half of these were of good quality.
- However, Some Principals had not properly documented their self-assessments or annual reviews (or took a tick box approach to completing them by using templates that did not cover all of the points set out in SUP 12.6A).
- Most Principals had not changed their onboarding or termination procedures since the new rules were introduced.
- Principal firms must consider their existing processes in light of the new rules if they are assessing whether their processes are are robust and sufficient, and they must be able to evidence why they believe their processes to be robust.
The FCA will continue to monitor compliance with the rules, with a particular focus on annual reviews, self-assessments, and the quality of oversight of ARs.
