FCA reminds principals of AR risks

FCA has issued a further warning to firms that act as principal to appointed representatives or IARs. The warning follows an alert it published last year because of concerns over introducers having an inappropriate influence on principals’ business. FCA says introducers can, for example, refer customers with documentation including investment choice already completed. Principals must ensure they properly supervise their introducers and comply with appropriate rules.

FCA cautions that principals should:

  • ensure they understand the entire business of their ARs and be sure the ARs do not carry out regulated activities beyond the scope of their agreement with the principal
  • understand why they are appointing an AR, and not appoint them where it is not necessary;
  • undertake proper due diligence on ARs and monitor their activities appropriately;
  • ensure all individuals within ARs who require FCA approval get that approval before starting the relevant function; and
  • review their relationships to ensure no introducer has undue influence over the firm.