Consumer credit and appointed representatives

4 minute read
05 March 2014

With the Financial Conduct Authority (the FCA) set to take over responsibility for the regulation of consumer credit on 1 April 2014, firms have been preparing for a major shift in the operation of their industry. There are many questions surrounding this change, here we answer some of the key ones.

What is an appointed representative?

An appointed representative is someone who is not authorised by the FCA but who has entered into a relationship with a firm which is authorised by the FCA whereby that second firm (referred to as the principal) permits the first firm (the appointed representative) to carry out certain regulated activities that fall within the scope of the principal's authorisation. The relationship is subject to various rules. These include the Financial Services and Markets Act (Appointed Representatives) Regulations 2001 and parts of the FCA Handbook.

What relationship does an appointed representative have with the FCA?

The appointed representative does not, in its role as authorised representative, have any direct relationship with the FCA.

So who makes sure that the appointed representative follows FCA Rules?

Principals are responsible for ensuring that their appointed representatives comply with FCA Rules. If the FCA becomes aware of compliance issues regarding an appointed representative they would take action against the principal – not against the appointed representative. This does not, of course, mean that appointed representatives escape the burden of regulation.

Principals will require their appointed representatives to comply with applicable regulation and will monitor them carefully to ensure that they are doing so. Principals are taking a very considerable responsibility for their appointed representatives and will generally wish to have a close relationship with them. The terms of that relationship will be set out in an agreement that must comply with various regulations. It is also worth noting that, while appointed representatives are not authorised by the FCA, they are nevertheless listed as appointed representatives on the Financial Services Register.

Will the arrangements regarding appointed representatives be different for consumer credit firms?


At present, a person who is authorised by the FCA (or the Prudential Regulation Authority) may not themselves be an appointed representative of another authorised person. That will be different in the case of consumer credit.

Regulations which are due to come into force on 1 April 2014 will provide that authorised firms whose only FCA permissions are for certain consumer credit activities may, in certain circumstances, become appointed representatives for other purposes. This reform was designed to ensure that, for instance, a broker who is an appointed representative for insurance purposes will not have to abandon this status if they become an authorised person for credit broking purposes. It introduces a welcome degree of flexibility that might be of use more widely.

Next steps

Firms who are currently appointed representatives, who wish to continue to act as such and who also wish to become authorised for consumer credit purposes should review their situation carefully and see whether they meet the requirements to continue to be appointed representatives once they become authorised.

More generally, firms who are considering their options post 1 April 2014 should review the role of appointed representative and see whether it might be suitable for them.

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