Key things you should know about appointed representative regulations

20th September 2018 2955 - Blog Posts

Obtaining direct FCA authorisation can be a lengthy and costly process so many financial firms look to appointed representative (AR) solutions instead. In this article we will look at some of the key points regarding appointed representative regulations that you should know.

What are appointed representative solutions?

Section 19 of the Financial Services and Markets Act 2000 specifies that a person cannot carry out regulated activities in the UK unless authorised by the Financial Conduct Authority (FCA) or the Prudential Conduct Authority (PRA). This is known as the general prohibition, but there are a few exemptions which may apply. These include recognised investment exchanges, clearing houses, and individuals falling within certain professions, for example, members of Lloyds and members of the professions, and appointed representatives.

appointed representativeIn order to conduct regulated activities, firms can choose to become an appointed representative for a principal that has its own FCA authorisation. Sapia Partners LLP and G10 Capital Limited – part of the Lawson Conner Group, are principals with the combined experience of having launched more than 300 regulated entities, offering AR solutions that ease much of the compliance burden.

What you need to know about appointed representative regulations

There are still some regulations surrounding appointed representative solutions that are important to be aware of, and these are detailed within section 39 of FSMA 2000.

Appointed representatives are exempt from the general prohibition outlined above for activities within the scope of their principal’s authorisation, and for which the principal has accepted contractual responsibility. As financial compliance becomes increasingly complex, this means becoming an appointed representative of a firm like Sapia Partners LLP or G10 Limited may offer a much quicker route to market as your fund could be operational in a few weeks as opposed to up to 12 months it can take to obtain FCA authorisation directly.

Another aspect of the appointed representative regulations is that the principal of an AR is required to supervise its compliance, meaning the principal being given access to staff, premises and confidential records. Although an AR can market its products and provide investment advice it cannot manage funds directly. In this case the principal firm would act as the manager of the fund.

Brexit and appointed representative regulations

In the current backdrop of post-Brexit uncertainty, there is still doubt about passporting rights in the case of a hard Brexit. In this scenario, AR solutions are particularly useful for firms that want to carry out regulated activities in Europe because appointed representative arrangements are flexible and any firm can respond to any Brexit outcome quickly without having established a complete regulatory infrastructure. Sapia Partners LLP, provides MiFID passport services, including operating in Europe as a tied agent, which works well if you want to distribute UCITS funds or operate in the primary finance markets across the European Economic Area.

Appointed representative solutions are a viable option for firms who want a faster route to market and the peace of mind that much of their regulatory burden will be reduced. Those under the Lawson Conner umbrella will benefit from a depth of regulatory, compliance and legal expertise and our state-of-the art technology platform for onboarding and continuous monitoring. To find out more about appointed representative regulations and the benefits that our AR solutions can bring, contact us today.