On 3rd August, the FCA published PS22/11, setting out the responses – and the FCA's feedback – to its proposed changes to the AR regime, plus the final rules. 

As outlined in our previous update, the FCA's proposals in CP21/34 focused on two main areas of change aimed at addressing the harms identified and protecting consumers. These were: 

  • collecting additional information on ARs and strengthening reporting requirements for principals; and 
  • clarifying and strengthening the responsibilities and expectations of principals.

The CP also included a discussion chapter, seeking views on potential areas of future change. This was developed alongside the Treasury’s Call for Evidence (CfE) on the regime, which explored potential legislative changes.  The Treasury is currently analysing the responses to its Call for Evidence and will set out next steps on its review of the AR regime in due course.

Changes in the final rules

Following responses to the consultation, FCA has made the following changes in the final rules:

ProposalFinal rules
Principals notify the FCA of future AR appointments 60 days before the appointment takes effect.The pre-notification period for new AR appointments will only be 30 days.
Within 60 days of rules coming into force, principals must provide information on their existing ARs.For existing ARs, FCA will collect the data via a Section 165 data request. Principals will then have 60 days to submit the data on all their existing ARs.
Principals provide more information on the business of their ARs, including the nature of the regulated activities the ARs will conduct.The FCA is not taking forward the proposal to require principals to provide:
1.  details on any non-regulated non-financial activities an AR performs; and
2. an estimation of the proportion of a proposed AR’s non-regulated activities.
The FCA are introducing revenue bands for reporting anticipated revenue of the AR from regulated and non-regulated activity.
Principals provide complaints data and revenue information for ARs on an annual basis.The FCA is giving principals more time (60 rather than 30 business days) to annually report AR complaints and revenue data.
The FCA publish on the Register the nature of the regulated activities the principal permits the AR to undertake.The FCA is not proceeding with this.
Require principals to notify us whether they provide currently, or intend to provide, regulatory hosting services.The FCA has refined the definition of ‘regulatory hosting’ in light of feedback. The only effect of firms’ business models coming into scope of the definition of ‘regulatory hosting’ is that these firms will need to notify the FCA of their intention to provide such service in advance. There are no additional rules or restrictions on firms which provide such services (yet).
The FCA proposed that principals:
  • apply enhanced oversight of their ARs, including ensuring adequacy of systems and controls, sufficiency of resources and monitoring AR growth 
  • take more effective responsibility for their ARs, including by monitoring and assessing the risk of harm to consumers and market integrity and overseeing ARs to a comparable standard as if they were employees of the principal 
  • have clarity on the circumstances where they should terminate an AR relationship and assist ARs with an orderly wind down, and 
  • annually review information on ARs’ activities, business and senior management. Principals would also need to prepare a self‑assessment document at least once a year, covering how they meet the requirements of the policy.
The FCA has clarified that:
  • the annual review requirements can be met by principals integrating them into existing internal reporting processes, so long as they continue to meet the standards set out in the rules
  • the annual reviews can be conducted by responsible individuals with a suitable degree of knowledge and authority below the governing body’s level, with significant issues identified at specific ARs escalated to the governing body
  • the self-assessment should focus on how the principal itself is meeting its responsibilities in relation to all of its ARs

Next steps 

The FCA is introducing a 4 month implementation period before the changes take effect (taking us to 8 December 2022).  Some transitional provisions will be in place. 

Principals should expect to receive a request for data about their ARs later in 2022.