Financial Conduct Authority  

Compliance firm refused permissions to run investment network

Compliance firm refused permissions to run investment network

The Financial Conduct Authority has refused the Part 4A permissions for a compliance consultancy after it could not demonstrate that it had the skills, experience or the staff to oversee appointed representatives.

Alexander Jon Compliance Consulting Limited (AJCC) applied for permissions to arrange investment deals and advise on investments as principal for a group of appointed representatives.

It had told the regulator it wanted to take responsibility for firms carrying out regulated activities in relation to certain securities, options and futures (excluding commodity options and futures) for retail clients, professional clients and eligible counterparties.

But it later told the FCA it never intended to advise retail clients.

The FCA refused to authorise the firm saying it had failed to demonstrate it had the relevant skills.

The FCA said the firm had been unable to describe a viable or sustainable business model and had also been unable to explain how its ARs would assess that products or services were appropriate for consumers, or to demonstrate that it would have direct responsibility for the conduct and compliance of its ARs.

It also did not have the relevant staff or any idea of who its ARs would be.

The City watchdog said it refused the application to protect consumers from the risk of using a poorly overseen investment business. 

It said: “The authority is not satisfied that AJCC has the appropriate non-financial resources for the regulated activities it seeks to carry on. AJCC has one director and no employees. 

“AJCC’s director has relevant and longstanding compliance experience but has not satisfied the authority that they have the skills and experience to manage and oversee an investment business as principal.”

In a final notice dated to yesterday (May 11), it said AJCC had informed the FCA that it intends to recruit additional compliance professionals to assist with providing the oversight required to ensure that its ARs act compliantly.

However the FCA said the firm had not made it clear how it intends to fill the relevant experience gaps and lacked clarity and understanding in respect of the skills it would need to recruit for. 

It said: “The authority expects firms, like AJCC, seeking to offer regulatory hosting services to understand that to oversee ARs and ensure compliance with the appropriate rules and requirements, they need to recruit appropriate personnel with knowledge and frontline experience of advising on or arranging deals in investments, or of running a business which carries on those regulated activities."

This comes as the FCA began its crackdown on ARs, stating it will require firms to run verification checks on ARs annually after detecting a "wide range of harm across all sectors" containing this model. 

Earlier this month, it launched a dedicated appointed representatives department which will focus on tackling harm posed by ARs and their principal firms.

FCA executive director of authorisations Emily Shepperd, said: "It is vital those who are seeking the FCA’s authorisation meet our high standards. If this is not the case, we will refuse their applications in the interests of consumers and other businesses."