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.
FCA provide guidance on SMF16/17 appointments
Richard Foster Compliance FCA, ML, PI, training
Firms should have heads of compliance and money laundering reporting officers (MLROs) who are suitably competent and capable of effectively performing the roles. It is appropriate to carefully consider how individuals can demonstrate this ahead of seeking regulatory approval. The FCA have recently issued guidance which should help firms decide if an individual candidate is […]