What is an Appointed Representative?

Appointed Representatives (ARs) play a crucial role in ensuring compliance with financial regulations. In this guide, we will explain what an Appointed Representative is, the nature of their regulatory responsibilities and how they deliver benefits to both individuals and firms in the financial industry.

What is an Appointed Representative?

An appointed representative is a firm that undertakes regulated activities and acts as an agent for a firm directly authorised by the FCA. This firm is known as the appointed representative’s “Principal” firm.

What are the regulatory responsibilities of the “Principal”?

In this arrangement, there is a written contract between the Principal and the AR in which the Principal takes full responsibility for ensuring that the appointed representative complies with all of the FCA rules relating to its industry.

What are the regulatory responsibilities of the appointed representative (AR)?

Appointed representatives don’t directly report to the FCA. However, they have an obligation to understand and comply with the regulatory requirements for their company. Every AR needs a customer facing individual (CF30) to go on the FCA register. Directors and Partners of ARs also need to go on the FCA register as a CF1/CF4. All FCA regulated individuals are required to be fully trained and comply with the regulations.

What are the benefits of becoming an AR?

Reduced Costs: 

The application process for a firm to become directly authorised can be costly. It requires the submission of a comprehensive business plan and investment in staff and offices. As a result many firms find it more cost effective to become an appointed representative.

Streamlined Onboarding: 

The process of becoming an AR is generally quicker than seeking to achieve direct authorisation which can take many months. ARs can leverage the Principal’s existing compliance infrastructure, saving time and effort.

Access to Compliance Support: 

AR benefits from the Principal’s expertise and compliance resources. This can include guidance on regulatory matters, procedures and manuals, training programs, and ongoing support to ensure compliance.

Shared Regulatory Responsibility: 

By partnering with a Principal, ARs are able to offload some of the regulatory burden. The Principal is responsible for overseeing compliance activities, allowing the AR to focus on its core business activities.

What is the process of becoming an AR?

The Principal firm will undergo due diligence on the prospective appointed representative firm by harvesting and assessing information on the company, its resources (both financial and non-financial) and culture. 

What documents do I need to become an appointed representative?

You will need to produce a selection of documents that include:

• Business plan
• Financial projections for the next three years
• Ownership structure chart
• Details of professional indemnity insurance

For directors or partners and individuals who are “approved persons” performing regulated activities you will need to provide a number of documents that include:

• Certified proof of ID
• Certified proof of address
• Employment CV for the last five years
• Contact details for references
• List of directorships held in the last 10 years

When does it make sense to become an appointed representative?

The AR model works for most financial services business types. Although the majority of appointed representative firms are small businesses, Principal firms can accommodate medium-sized enterprises if they have sufficient capital and resources. Using the appointed representative model enables firms to outsource the complex challenges and compliance responsibilities to another firm which in turn keeps the operating model simple, low cost and flexible. The model also works well where a firm anticipates a degree of operational or strategic change. The appointed representative can start with permission to undertake one regulated activity and, as the business plan evolves, it can, with the agreement of the Principal firm, add further activities. Outside the insurance industry, the model has been popular with firms undertaking fund marketing, fund advisory and corporate advisory.

What considerations are there with being an appointed representative?

For a firm looking to become an AR, one of the main considerations should be finding the right Principal firm. Depending on the complexity and size of the firm, the appointed representative might deem some Principal firms more appropriate than others. The appointed representative needs to be comfortable that its Principal firm has robust systems and controls, the relevant expertise and adequate levels of capital. Although an appointed representative will lean on its Principal, it will need to demonstrate many of the characteristics of a directly regulated firm. For example, authorised individuals will need to be judged fit & proper and the firm will need to demonstrate that it is solvent. Going down the appointed representative route is cost effective, but it does not allow for lower quality businesses to undertake regulated activities.

Why become an appointed representative of Thornbridge?

At Thornbridge we are solely focused on providing your firm with the best regulatory hosted solution in the market. Our mission is to keep your firm compliant as well as help you build a successful venture.  We offer real expertise alongside a can-do approach and the solutions we provide are bespoke, flexible and cost effective. Our people are knowledgeable and have decades of first-hand experience in the activities we oversee.

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