Enhanced Oversight of Appointed Representatives: FCA Scrutiny

The FCA has put Appointed Representative (AR) oversight firmly under the microscope. Earlier in September, the regulator wrote to a number of firms — including those within the insurance sector — as part of a multi-firm review into how principal firms govern and oversee their ARs.

This is more than a routine information request. It is a clear signal that AR oversight is now a strategic regulatory priority, and principal firms should expect direct scrutiny. The FCA expects principals to be able to evidence strong governance, risk management, and monitoring frameworks at all times — not just when asked.

For firms not selected, this still acts as a wake-up call: if weaknesses exist, now is the time to address them before the FCA comes knocking.

Purpose of the FCA Letter

The FCA’s communication aims to:

• Test principal firms’ AR oversight frameworks against the enhanced requirements introduced in December 2022.
• Collect evidence on governance, monitoring, and documentation practices.
• Identify systemic weaknesses across the sector, with a view to supervisory intervention or enforcement where necessary.

In short, the FCA is using this exercise to raise standards and hold principals accountable for the conduct of their ARs. Firms unable to demonstrate effective oversight should prepare for closer scrutiny — and potentially regulatory action.

Implications for Firms

Being selected for this review has wide-ranging consequences:

• Regulatory Risk: Weaknesses may trigger further questioning, follow-up visits, or enforcement.
• Resource Burden: The FCA has requested a broad range of information — business models, risk/conflict registers, AR agreements, onboarding/offboarding processes, complaints analysis, PII schedules — requiring cross-team input.
• Reputational Exposure: Thematic findings may be published, potentially naming poor performers.
• Board Accountability: The requirement for board-signed self-assessments reinforces that AR oversight is a board-level responsibility, not just a compliance function.

Focus Areas for Firms

The FCA expects firms to demonstrate robust control in the following areas:

• Governance & Risk Management: Up-to-date risk/conflict registers, board engagement, and clear oversight responsibilities.
• AR Agreements: Comprehensive written agreements defining scope and obligations.
• Onboarding & Due Diligence: Rigorous pre-appointment checks, conflicts analysis, references, and risk assessments.
• Monitoring & Oversight: Ongoing supervision through MI, file reviews, site visits, and financial monitoring.
• Offboarding Processes: Documented termination procedures and rationale for AR exits.
• Complaints Oversight: Collection and analysis of AR complaints data, including root cause analysis and remedial actions.
• Annual Reviews & Self-Assessments: Evidence of annual oversight exercises with board sign-off.
• Professional Indemnity Insurance (PII): Assurance that AR activities are appropriately covered.

Next Steps for Firms

Firms receiving this letter should act quickly:

Immediate Response:

• Acknowledge the FCA request promptly.
• Assemble all requested documentation (AR agreements, risk/conflict registers, onboarding policies, monitoring frameworks, complaints MI, PII schedules, etc.).
• Ensure responses are consistent, complete, and quality-checked before submission.

Internal Gap Analysis

• Assess whether current AR oversight arrangements fully meet FCA expectations.
• Where weaknesses exist (e.g. outdated agreements, incomplete monitoring records), begin corrective action and be ready to explain how these are being addressed.

Ongoing Preparation

• Anticipate FCA follow-up such as further questions, supervisory visits, or thematic reports.
• Make AR oversight a standing item on board/committee agendas.
• Treat this exercise as a dress rehearsal for a full supervisory review.

How We Can Help

Navigating the FCA’s heightened expectations on AR oversight can be complex and resource-intensive. Padda Consulting partners with principal firms to strengthen compliance frameworks and governance, offering:

• AR Oversight Readiness Review – Gap analysis of governance, monitoring, onboarding/offboarding, and documentation.
• Documentation & Policy Support – Drafting/updating AR agreements, onboarding checklists, monitoring procedures, and self-assessment templates.
• Monitoring Framework Development – MI dashboards, risk-based AR review schedules, and escalation protocols.
• Governance Enhancements – Strengthening reporting lines, oversight committees, and board engagement on AR risks.
• Training & Workshops – Staff training on FCA expectations, AR compliance workshops, and preparation for regulatory interaction.
• FCA Engagement Preparation – Using ex-FCA supervisors to prepare senior management and boards for regulatory meetings and information requests.

Get in touch to discuss how we can help your firm strengthen AR oversight and stay ahead of FCA expectations.