What now for retailers’ appointed representative status?

By Tara Williams, Chief Risk and Compliance Officer

On 3 December 2021, the FCA published a press release titled: “FCA proposes stronger requirements on oversight of appointed representatives.” It heralded the start of a consultation that the regulator noted focused on “improving the appointed representative regime and tackling harm from this model”.

The consultation closed in early March. There is clearly momentum for change in the Appointed Representative (AR) and very broadly Introducer Appointed Representative (IAR) models alike.

In 1986, the AR model was created to allow self-employed representatives to engage in regulated activities without having to be authorised. Over time, the model has broadened, something we see in motor retailing, where FCA authorised principal firms provided AR status to offer finance and or insurance products/services to a broad range of retailers for whom they have oversight responsibility.

The FCA’s assessment of “harm” was summarised by clear evidence that principals had more complaints per £1m of revenue than non-principals. The position was particularly apparent where principals were of a smaller scale.

Looking further, principals were often unclear about their regulatory responsibilities for their ARs and provided insufficient oversight of them. The situation was exacerbated by inadequate controls for regulated activities for which they have accepted responsibility. In short, things were too “light touch”.

The direction of travel

For principals, such as AutoProtect Group, the FCA has re-emphasised our full responsibility (including any liabilities that might arise) to ensure that our ARs are fit and proper and comply with all FCA rules.

To fulfil these responsibilities, principals will be required to be far more hands-on in their oversight duties, evidenced by the supply of far more reported information on a broad list of criteria.

At a high level this includes; the AR’s business background, revenues, complaints record, details on regulated and non-regulated activities, financial arrangements between principal and AR, annual reviews of senior management at ARs fitness and propriety and aspects of the ARs’ business and activities.

More resources required

There can be no doubt that the proposals will require significantly more time, effort and cost for retailers. It will also mean that principals, as the regulator recognises, will require sufficient resources to maintain the adequate controls required.

Indeed, the FCA references the need for principals to have the necessary people, processes, technology, facilities and information and, by implication, financial backing to oversee the AR’s activities and potential liabilities.

At AutoProtect, we have the resources and backing to fulfil the FCA’s remit and, as always, we will ensure our retail clients are kept abreast of the changes required. Our role is to help dealers promote F&I services fairly, compliantly and ethically working as a part of their team. Looking ahead, I’m sure we will be working together even more closely and as seamlessly as possible.