A compliance expert has claimed there is still a place for appointed representatives (ARs) despite the City regulator’s crackdown.
Mark Turner, managing director in Kroll’s financial services compliance and regulation practice, said that many ARs are following the rules and operating in line with the regulator’s expectations, and will continue to “play a role moving forward”.
His comments come after a period of scrutiny around the AR/principal model.
In December, the the Financial Conduct Authority (FCA) proposed tougher rules for the oversight of ARs after seeing a “wide range of harm” for consumers.
Then in April the watchdog set up a new division to better supervise ARs and published its three-year strategy, which set out its plans to “intensify” its supervision of principals to cut down “the most significant risks” of ARs.
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Since 26 February 2021, Rebuildingsociety’s ARs have been unable to do any new lending, after the regulator expressed concerns around the AR/principal structure for peer-to-peer lending platforms.
Yet several crowdfunding platforms still operate as an AR under the principal ShareIn, including AxiaFunder, Energise Africa and LEO Crowdfunding and P2P lender Qardus.
“The crackdown has been driven by some principal firms not meeting the expectations of the FCA, and also by some ARs being caught up in various scandals, particularly in the area of customer promotions, marketing and the sale of inappropriate products,” said Kroll’s Turner.
“Such scandals have highlighted weaknesses in governance and oversight by principal firms, which have no doubt been a big driver of the FCA’s focus in this area.
“There are many ARs and principal firms that are operating in line with the FCA’s expectations, and they will continue to play a role moving forward.”