Context
The FCA has published a review report indicating that, whilst Principals’ oversight of ARs is improving, there is more to do. The report sets out good practice and areas for improvement to help Principal firms effectively monitor their ARs. Under the FCA’s enhanced AR regime (introduced in December 2022), Principals must carry out annual reviews of each AR they appoint, and annual self-assessments of their ability to oversee their ARs.
Key points to note and next actions
The review involved a telephone survey with 251 Principal firms and in-depth assessments of documentation from 23 firms. Examples of good practice from Principals included:
- keeping clear documentation to show compliance with the FCA’s enhanced rules; and
- using a broad range of checks and information to oversee and monitor ARs’ activities.
The FCA, however, found some firms were taking a “tick-box approach” to complying with its rules, relying on basic information like website checks; or using self-declarations from their ARs to demonstrate effective oversight.
The review also found:
- 1 in 5 Principals had not carried out a required self-assessment or annual review of their ARs.
- Approximately half of Principals were not regularly reviewing their AR agreements.
- A third of Principals were not using data or MI to keep tabs on whether ARs were acting within the scope of AR agreements.
- Most firms had not changed their AR onboarding or termination procedures since the rules were introduced.