Financial Conduct Authority  

What advisers can learn from the FCA's warning to principals

Little evidence was found of client file reviews, testing or challenge being undertaken by principals. 

The issue of oversight of appointed representatives is an issue which has appeared previously in the advice market.

In 2018 Tenet lost a High Court case after a judge ruled the network was liable for the unregulated activities of one of its appointed representatives.

Later this year the regulator will roll out the Senior Managers and Certification Regime to the advice sector, in a move expected to encourage transparency and accountability in the wider financial services industry. 

In its policy statement published last year the FCA said principal firms would remain fully responsible for their appointed representatives once the new rules are implemented, with senior managers expected to ensure the regulator's requirements are satisfied.  

With advice firms or IFAs who are appointed representatives falling outside of the SM&CR, and remaining within the current approved persons regime, principal firms and networks may begin to exercise more oversight and implement stricter requirements for on-boarding.

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