What Now for Dealers’ Appointed Representative (AR) Status?
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.
As Tara Williams, Chief Risk and Compliance Officer, AutoProtect Group, observes, the FCA has been clear that they are unhappy with the current model; “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.
“Going forward, the FCA wants well-resourced principals with the resources to undertake a more hands-on role in ensuring regulatory compliance in promoting finance and insurance products.”
The FCA’s assessment of “harm” was summarised by clear evidence that principals had more complaints per £1m of revenue than non-principals. The position was particularly apparent where principals were of a smaller scale. Looking further, principals were often unclear about their regulatory responsibilities for their ARs and provided insufficient oversight of them. The situation was exacerbated by inadequate controls for regulated activities for which they have accepted responsibility. In short, things were too “light-touch.”
The Direction of Travel
For principals, such as AutoProtect Group, the FCA re-emphasised the business’ full responsibility (including any liabilities that might arise) to ensure that our ARs are fit and proper and comply with all FCA rules.
There can be no doubt 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.
Tara concludes; “At AutoProtect, we have the resources and backing to fulfil the FCA’s remit and, as always, we will ensure our retail clients are kept abreast of the changes required. Our role is to help dealers promote F&I services fairly, compliantly and ethically working as a part of their team. I’m sure we will be working together even more closely and as seamlessly as possible.”