Changes to the Appointed Representative (AR) model for financial services, including dealer F&I will see AR Principals expected to monitor, oversee and manage their dealers better, demonstrating appropriate oversight and control of their ARs' activities.

At the same time, the FCA is clear that they want Principals that can demonstrate appropriate oversight and control of their activities and which are financially stable. The FCA plans to announce new final rules in H1.

On December 3rd 2021, the FCA published a press release, "FCA proposes stronger requirements on oversight of appointed representatives." It heralded the start of a consultation on the future of the AR regime that closed in early March. The FCA plans to announce new final rules in H1 .

The FCA's press release announcing changes to the AR regime did not pull any punches. The regulator identified a wide range of harm across all the sectors where firms have ARs. At the heart of the issue, the FCA pointed to principals not performing sufficient due diligence before appointing an AR or inadequate oversight and control after an AR has been appointed.

Typically, any changes will impact dealers AR status with regard to added value insurance services, although some dealers are also Ars for their finance activity.

Reviewing the FCA’s documentation on the issue, the regulator has been clear that complaints involving AR Principals exceeded non-principals; the situation was particularly clear where principals were of a smaller scale. The issue for the FCA is that smaller Principals can lack the resources to undertake their responsibilities effectively. In short, too often oversight has been too "light-touch."

There can be little question that the proposals will require significantly more time, effort and cost for dealers. 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. It does look like more regulator change is on the cards.

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