Principal firms are responsible for ensuring their Appointed Representatives (ARs) comply with our rules. But many principals do not adequately oversee their ARs’ activities. Consumers are at risk of being misled and mis-sold, while misconduct by ARs in the financial sector can undermine market integrity. New rules and guidance came into effect in December 2022. These aim to improve principals' oversight of their ARs, increase the information they give us and raise standards across financial services.
Suitability and treatment/Confidence
Suitability and treatment icon
Outcome 1: Stronger oversight by principals to reduce harm caused through ARs
|
Metric code |
Metric description |
Source |
Baseline Value |
Baseline Value |
Year 1 values |
Year 2 values |
Latest status (year 2 value compared to baseline) |
|---|---|---|---|---|---|---|---|
|
OAR1-M01 |
Reduction over time in volume of complaints to firms about principal firms (P) compared to non-principal firms (NP) (per £1m of revenue from regulated activities) FCA firm complaints data/FCA retail mediation activities return data |
FCA data |
Firm complaints (2020): Overall average |
Firm complaints (2021) Overall average |
Firm complaints (2022): Overall average |
Firm complaints (2023): Overall average |
|
|
GI intermediaries – 65.0 (NP), 81.3 (P) |
GI intermediaries – 56.1 (NP), 118.2 (P) |
GI intermediaries – 58.6 (NP), 111.6 (P) |
GI intermediaries – 60.9 (NP), 70.3 (P) |
Improved |
|||
|
Advisers & intermediaries – 2.5 (NP), 3.6 (P) |
Advisers & intermediaries – 2.6 (NP), 3.5 (P) |
Advisers & intermediaries – 2.9 (NP), 5.2 (P) |
Advisers & intermediaries – 1.4 (NP), 5.3 (P) |
Declined |
|||
|
Mortgage intermediaries – 6.1 (NP), 8.8 (P) |
Mortgage intermediaries – 5.0 (NP), 6.3 (P) |
Mortgage intermediaries – 4.1 (NP), 8.4 (P) |
Mortgage intermediaries – 4.8 (NP), 4.9 (P) |
Improved |
|||
|
Firm complaints (2020): <200k |
Firm complaints (2021) <200k |
Firm complaints (2022): <200k |
Firm complaints (2023): <200k |
|
|||
|
GI intermediaries – 23.1 (NP), 742.6 (P) |
GI intermediaries – 29.6 (NP), 262.2 (P) |
GI intermediaries – 65.3 (NP), 77.4 (P) |
GI intermediaries – 111.6 (NP), 161.2 (P) |
Improved |
|||
|
Advisers & intermediaries – 1.6 (NP), 3.9 (P) |
Advisers & intermediaries – 3.4 (NP), 3.1 (P) |
Advisers & intermediaries – 3.4 (NP), 2.3 (P) |
Advisers & intermediaries – 4.8 (NP), 7.3 (P) |
Little or no change |
|||
|
Mortgage intermediaries – 10.7 (NP), 2.6 (P) |
Mortgage intermediaries – 4.0 (NP), 9.4 (P) |
Mortgage intermediaries – 3.1 (NP), 7.1 (P) |
Mortgage intermediaries – 2.3 (NP), 6.8 (P) |
Declined |
|||
|
£200k-1m
|
£200k-1m
|
£200k-1m
|
£200k-1m
|
|
|||
|
GI intermediaries – 6.0 (NP) 15.2 (P) |
GI intermediaries – 6.1 (NP), 17.3 (P) |
GI intermediaries – 11.4 (NP), 19.4 (P) |
GI intermediaries – 5.6 (NP), 20.6 (P) |
Declined |
|||
|
Advisers & intermediaries – 1.1 (NP), 1.7 (P) |
Advisers & intermediaries –1.7 (NP), 2.1 (P) |
Advisers & intermediaries –1.8 (NP), 2.2 (P) |
Advisers & intermediaries –0.6 (NP), 1.1 (P) |
Little or no change |
|||
|
Mortgage intermediaries – 2.8 (NP), 3.7 (P) |
Mortgage intermediaries – 2.4 (NP), 2.3 (P) |
Mortgage intermediaries – 3.4 (NP), 2.4 (P) |
Mortgage intermediaries – 1.6 (NP), 9.3 (P) |
Declined |
|||
|
£1-5m |
£1-5m
|
£1-5m |
£1-5m |
|
|||
|
GI intermediaries – 17.1 (NP) 21.1 (P) |
GI intermediaries – 29.3 (NP), 18.4 (P) |
GI intermediaries – 33.8 (NP), 20.2 (P) |
GI intermediaries – 17.5 (NP), 16.6 (P) |
Improved |
|||
|
Advisers & intermediaries – 2.1 (NP), 2.5 (P) |
Advisers & intermediaries –1.7 (NP), 4.9 (P) |
Advisers & intermediaries – 2.2 (NP), 3.9 (P) |
Advisers & intermediaries – 1.0 (NP), 1.4 (P) |
Little or no change |
|||
|
Mortgage intermediaries – 4.7 (NP), 8.7 (P) |
Mortgage intermediaries – 5.7 (NP), 4.1 (P) |
Mortgage intermediaries – 3.5 (NP), 8.8 (P) |
Mortgage intermediaries – 2.8 (NP), 2.4 (P) |
Improved |
|||
|
>5m |
>5m |
>5m |
>5m
|
||||
|
GI intermediaries – 84.1 (NP), 90.4 (P) |
GI intermediaries – 69.7 (NP), 138.7 (P) |
GI intermediaries – 53.3 (NP), 159.1 (P) |
GI intermediaries – 75.4 (NP), 78.7 (P) |
Improved |
|||
|
Advisers & intermediaries – 2.8 (NP), 3.8(P) |
Advisers & intermediaries – 4.5 (NP), 3.4(P) |
Advisers & intermediaries – 5.5 (NP), 5.7 (P) |
Advisers & intermediaries – 2.1 (NP), 6.0 (P) |
Declined |
|||
|
Mortgage intermediaries – 3.2 (NP), 8.7 (P) |
Mortgage intermediaries – 7.1 (NP), 6.6 (P) |
Mortgage intermediaries – 7.3 (NP), 8.8 (P) |
Mortgage intermediaries –13.6 (NP), 4.9 (P) |
Improved |
| Metric code | Metric description | Source | Baseline Values | Year 1 values | Year 2 values |
Latest status (year 2 value compared to baseline) |
|---|---|---|---|---|---|---|
| OAR2-M01 | Increase in the withdrawal rate following notifications by principal firms wanting to add new ARs in the short-to-medium term. Increase in the rejection, withdrawal and refusal rate of applications for FCA approval of individuals to perform controlled functions in ARs in the short-to-medium term. | FCA data | 3.8% of AR notifications (2021) | 1.6% of AR notifications (2022) | 5.9% of AR notifications (2023) | Improved |
| 3.0% of individual approval applications (2021) | 2.8% of individual approval applications (2022) | 6.5% of individual approval applications (2023) | Improved | |||
| OAR2-M02 | Increase in the volume of FCA supervisory cases and volume of intervention tools linked to ARs in the short-to-medium term | FCA data |
1115 Supervisory Cases opened (2020) 3182 Supervisory Cases opened (2021) |
1673 Supervisory Cases opened (2022)
|
1633 Supervisory Cases opened (2023) |
Improved |
|
Interventions: This is a new baseline metric. At least
(2023) |
Not assessed – new metric providing the baseline for the future | |||||
| OAR3-M01 | The proportion of firms who report that oversight of Appointed Representatives in their sector has improved in the last 12 months. | FCA and Practitioner Panel survey[1] |
% of principal firms who reported oversight has: Improved – 56% Stayed the same – 30% Don’t know – 7% Not applicable – 7% Decreased – 1% (2022/23) |
n/a |
% of principal firms who reported oversight has: Improved – 63% Stayed the same – 28% Don’t know – 4% Not applicable – 4% Decreased – 1% Difference between year 2 and baseline value is statistically significant for % stating ‘improved’, ’not applicable’ and ‘don’t know’. (2023/24) |
Improved |
What the latest metric values tell us
For metric OAR1-M01, complaints data show an improved picture for principals and ARs compared to non-principal firms on average. Overall, principals and ARs are still generating more complaints per £1m of revenue than non-principal firms in each of the 3 key retail portfolios in 2023. However, the gap between principals and non-principal firms has significantly narrowed for mortgage intermediaries and GI intermediaries.
For example, during 2020-2022 principal firms in the mortgage intermediaries portfolio averaged 7.8 complaints per £1m of regulated revenue. In 2023 that fell to 4.9. By contrast, non-principal mortgage intermediaries averaged 4.9 complaints per £1m of revenue over 2020-2022. In 2023 this fell slightly to 4.75.
The graph below shows that the gap between principals and non-principal firms has narrowed compared to the baseline, but not in all sub-portfolios. Whilst principals have improved overall, this is particularly driven by principal firms with higher revenues. For some firms with lower revenues have seen principal performance deteriorate and the gap in complaints generated by principal firms compared to non- principal is not narrowing in the same way.
Chart
Data table
From left to right this chart shows where principals have improved the most to where they have declined the most, relative to non-principal firms.
For metric OAR2-M01, during 2023, we have maintained robust standards at the Authorisations gateway. We have observed some principal firms providing more information at the point of submission as a result of our previous feedback suggesting the principal provides a fuller assessment. Our rate of withdrawals for Add AR notifications in 2023 increased to 5.9% and our rejection, withdrawal and refusal rate for applications to perform control functions related to an AR more than doubled to 6.5%. In 2022 the rates were 1.6% and 2.8%. We anticipated an increase but do not think we can infer an ongoing trend of higher RWR figures. Early signs for 2024 are that this upward trend is starting to reduce. We expect this rate to continue to fluctuate before we can have confidence it is reflecting improvements in due diligence by principals.
For metric OAR2-M02, in 2023, numbers of supervisory cases remain above the 2020 baseline though slightly below 2022 numbers. In 2021, we undertook a significant exercise raising cases against ARs and their principal firms who failed to tell us when the AR changed name, entered administration, liquidation or dissolution. This exercise led to a significant spike in cases opened relating to ARs in 2021 – with a drop in 2022 – but still at a higher level than in 2020. During 2023/24, our supervisory interventions have seen principals terminating relationships with c.300 Introducer ARs and c.350 Full ARs. For calendar year 2023, following our supervisory interventions, 20 firms have applied to impose requirements, 1 own initiative requirement was imposed by the FCA and there have been 3 Attestations, which restrict how firms carry out their business; and there have been many more informal interventions. Also, 9 skilled person reviews took place. In addition, 7 firms (new and existing principals) applied to impose requirements at the Authorisations Gateway.
For metric OAR3-M01, our FCA and Practitioner Panel survey 2023/24 showed that 63% of principal firms surveyed think that oversight of AR has improved because of the FCA’s actions this year. This is an increase from 56% last year. Only 1% believed oversight had decreased.