Appointed Representatives – some SM&CR questions

Occasionally, we come across firms that are ‘Principal Firms’ – i.e. the firm has Appointed Representatives (AR) but where one or more individuals straddle both the Principal and the AR.

This can raise questions around the applicability of SM&CR to such individuals since the SM&CR does not apply to ARs.

Why does the SM&CR not apply to ARs?

At first sight it seems illogical that ARs will continue with the Approved Persons Regime (APR) instead of all firms being covered by the SM&CR.

The reason why ARs are excluded from the SM&CR is that the relevant enabling legislation doesn’t give the FCA the power to extend the SM&CR to ARs. Beyond this legal position, there is a certain logic to it.

The Principal Firm is the regulated entity not the AR and the Principal is responsible for everything that goes on at the AR within the terms of the AR Agreement, including compliance with regulations. As the SM&CR is all about responsibility and accountability, it is not unreasonable that these will remain with the Principal Firm.

Some specific questions arising

Q1: If an adviser is employed by a directly authorised Principal but acts as an adviser for the firm’s AR, will the adviser come into the Certification Regime or the APR?

A1: As an employee of the Principal firm the adviser would be under the Certification Regime, not the APR. The adviser will, however, also need to be a Directory Person due to their role at the AR (ie requiring qualifications).

Q2: Would a person employed by the Principal, who is not a senior manager, but whose only role is managing advisers (T&C supervisor) for the AR come under the Certification Regime?

A2: Yes, as an employee of the Principal firm, if they are conducting a Certification Function. However, they may not be conducting a certification function as they are not supervising/managing a certified person, as they would be if the advisers were at the Principal firm, but instead supervising advisers at the AR (who are not certified persons). If the person does not meet any of the definitions of certification functions, the firm can of course voluntarily apply similar standards if they wish.

Q3: Would the employee in Q2 (who is only supervising and has no client contact) have to be on the Directory as an AR Directory Person?

A3: No, as they are not dealing with customers of either the AR or the firm, or their property, (per the Glossary definition of AR Directory Person).

The relevant part of the Handbook is SYSC 27.4.2G (10/12/2018).

Summary

  • Advisers can remain employed by the principal firm and act as advisers for the AR (subject to the caveats indicated below).
  • Advisers do not need to become CF30 (AR) as they are employed by the principal firm, not the AR.
  • Advisers will however need an addition to their Directory Persons listings on the Register – ‘AR dealing with clients for which they require qualification’ needs to be added.

Which hat?

It is essential that clients are clear about who is providing the advice (e.g. AR or Principal) so the adviser needs to wear the ‘right hat’!

  • The AR agreement would need to include reference to this.
  • The disclosure would need to explain this (and any implications).
  • The HR agreements (contract to supply service to another company) would also need to be clear on this. There could be legal and HMRC implications and appropriate advice should be sought.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Action Required By You

For information.
SUIT - Beautiful Reports
CREATE BEAUTIFUL
SUITABILITY
REPORTS
SUIT - Complete Control
TAKE BACK
CONTROL OF YOUR
SUITABILITY REPORT
PRODUCTION
SUIT - Comp confidence
SUITABILITY
REPORTS
WITH FULL
COMPLIANCE
CONFIDENCE
COMP - Hands on
HANDS-ON COMPLIANCE
Helping you to implement solutions
COMP - File checking
FILE CHECKING
All business cases checked, including DB transfers
COMP -166
Section 166 and
Regulatory Reviews
Extensive S166 experience
COMP -healthchecks
Audits and
Health Checks
Need a regulatory check-up?
COMP -166
E-COMPLIANCE
A lighter touch support service
COMP -166
FCA Applications
We have completed hundreds
of Part IV applications
previous arrow
next arrow

About the Author

John is Chartered Financial Planner and a Fellow. With a wealth of financial services experience, including as a successful adviser, John is a long standing ATEB consultant, with a proven track record of delivering robust compliance and T&C solutions across all regulatory disciplines.

Contact Us

Brought to you by

Explore more articles in this category

Other articles that you might be interested in