SM&CR and Appointed Representatives

We were recently asked the following question about Appointed Representatives (AR). 

What happens with a CF1 (AR)? Are they automatically converted to SMF3 (AR)?

The answer is NO. 

The SM&CR won’t apply to Appointed Representatives. They will continue to be subject to the Approved Persons Regime (APR). 

The CF30 – Customer Function will no longer be approved under the SM&CR and is therefore not available for conversion mapping. CF30s at Appointed Representatives will be unaffected by the SM&CR as they remain subject to the APR.

Why does the SM&CR not apply to ARs?
At first sight it seems illogical that ARs will continue with the Approved Persons Regime instead of all firms being covered by the SM&CR.

The reason why ARs are excluded from the SM&CR is that the relevant legislation doesn’t give the FCA the power to extend the SM&CR to ARs. This could be reviewed in future.

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 (notwithstanding recent Court judgements) 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.

Conduct Rules
That begs the question as to whether the Conduct Rules apply to staff at ARs.

The answer again is NO. SM&CR does not apply to ARs and that includes the Conduct Rules. That ARs are out of scope is confirmed in COCON 1.1.8A (R) (2) which covers when conduct rules do not apply.

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.

Our View

The position of ARs in relation to SM&CR is clear and unambiguous … it does not apply!

However, there is nothing in the rules that prohibits Principal Firms from deciding, as a matter of policy and good practice, to implement the Conduct Rules in the AR.

The Conduct Rules have potential implications for contracts of employment in all firms and these need to be addressed in conjunction with firms’ HR and Legal advisers.

But Principal Firms should consider whether to apply Conduct Rules across the business. It could be a prudent approach to improving the culture within the firms.

Action Required By You

  • Ensure SM&CR preparations are well in hand – 9 December is not far away;
  • Principal firms should decide whether to apply the Conduct Rules in ARs;
  • ATEB has developed a suite of tools and templates to assist firms in preparing for and implementing the SM&CR, including Conduct Rules training – contact ATEB for further assistance and information.
SUIT - Beautiful Reports
SUIT - Complete Control
SUIT - Comp confidence
previous arrow
next arrow

About the Author

Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

Contact Us

Brought to you by

Explore more articles in this category

Other articles that you might be interested in