On November 3, the UK Financial Conduct Authority (FCA) published an alert addressed to all firms who have Appointed Representatives or Introducer Appointed Representatives (ARs). An AR is a person who conducts regulated activities and acts on behalf or under the regulatory structure/licence of an authorized firm (its principal).
The FCA is particularly concerned about (1) the influence that an introducer may have over a principal firm and its ARs; (2) the risk that ARs may be providing regulated activities outside of the arrangement they have with the principal firm; (3) principal firms appointing ARs when they are not actually necessary; and (4) principal firms performing insufficient due diligence and monitoring of ARs.
The FCA expects principal firms to review and consider:
- the introducer relationships they and their ARs have to determine if their firm is under undue influence;
- their AR relationships to ensure they remain necessary, appropriate and relevant for their type of business;
- their processes in relation to persons with significant control and senior management responsibilities/functions within their ARs;
- whether their AR and introducer due diligence and monitoring processes are adequate;
- whether they need to take any additional steps to ensure the actions of their ARs are compatible with their obligations as an AR and allow them to meet their regulatory responsibilities; and
- a previous alert issued by the FCA on August 2, 2016, available here.
The alert is available here.