principals and appointed representatives are clear from the outset and, as such, there is a need to have suitably robust agreements in place between both parties. These should clearly set out responsibilities and boundaries to ensure that the appointed representative is fully aware of the terms of its appointment, the scope of its operation, and its reporting and monitoring obligations. This is the starting point and needs to be a solid foundation to build on.
Systems and controls
The systems and controls in place at a principal firm should be strong, and it should be clear that these controls also extend to the activities of the appointed representative. As the appointed representative is operating under the permissions and supervision of the principal firm, the expectation is that all systems and controls set out by the principal would be followed by the AR. This should include:
• Training and competence regime
• Financial promotions approval
• Financial crime controls
• Sales and advice process
• Customer facing documentation approval
• Investment process and philosophy
• Complaints management
An appointed representative should not operate independently of its principal, and there should be clear processes in place to ensure that any AR follows the rules set out.
The FCA does not just want oversight, it wants evidence
Regular conversations between the principal and ARs are encouraged, but that alone does not equate to strong oversight. It ' s important to ensure that any monitoring and oversight of appointed representatives is clearly evidenced via strong record keeping and management information.
If the FCA requested evidence tomorrow, could you demonstrate:
• Why an AR was suitable when it was appointed?
• How you assessed its fitness and propriety?
• What was the expected activity( based on its business plan) and was this delivered?
• How often you review its activities?
• What action you have taken when issues were identified?
• How you know customers are receiving good outcomes?
These are exactly the types of questions firms are increasingly being asked during supervisory reviews.
Good oversight isn ' t simply about carrying out reviews, it ' s about maintaining a clear audit trail of ongoing oversight that demonstrates informed challenge, effective monitoring, and appropriate decision-making.
The danger of " Set and Forget "
A common weakness in AR frameworks is treating onboarding as the hard part and ongoing oversight as an administrative exercise.
In reality, most risks with appointed representatives emerge after appointment. Businesses evolve, new products are introduced, staff change, sales pressures increase, financial positions can deteriorate – all of these factors can present post-appointment risks which need to be monitored. An AR that appeared relatively low risk when it was appointed may look very different a few years later.
That is why ongoing monitoring is so important. Principal firms should have a clear understanding of what their ARs are doing, the quality of business they are writing, the complaints they are generating, and whether their activities remain aligned with the firm ' s expectations and risk appetite.
Annual reviews need to mean something
The FCA requires principal firms to conduct a formal review of each AR at least every 12 months. This is not optional, it is hard-wired into the rules. However, the regulator ' s concern is not whether a review exists, but whether it is genuinely assessing risk.
A meaningful review should challenge whether the AR remains suitable and ask some key questions:
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