If at any time a firm has reasonable grounds to believe that the conditions in SUP 12.4.2 R, 2SUP 12.4.6 R or SUP 12.4.8A R2 (as applicable) are not satisfied, or are likely not to be satisfied, in relation to any of its appointed representatives, the firm must:2
take immediate steps to rectify the matter; or
terminate its contract with the appointed representative.
7A firm that is a principal of a tied agent that is an appointed representative must monitor the activities of that tied agent so as to ensure the firm complies with obligations imposed under MiFID (or equivalent obligations relating to the equivalent business of a third country investment firm) when acting through that tied agent.
[Note: paragraph 3 of Article 23(2) of MiFID]
The FCA would normally expect a firm to carry out a check on its appointed representative's financial position every year (more often, if necessary) and to review critically the information obtained. An appropriately experienced person (for example, a financial accountant) should carry out these checks.
Consideration should be given, among other things, to the impact on the appointed representative's financial position of any debts owed to, or by, the appointed representative. Indicators that an appointed representative is experiencing financial problems may include failure to adhere to repayment schedules for any debts, failure to meet any other financial commitments or requests for advances of commission.
A firm must not permit an appointed representative to hold client money unless the firm is an insurance intermediary acting in accordance with CASS 5.5.18 R to CASS 5.5.23 R (which include provision for periodic segregation and reconciliation)2.
The firm must take reasonable steps to ensure that if client money is received by the appointed representative, it is paid into a client bank account of the firm, or forwarded to the firm, in accordance with :
does not carry on regulated activities in breach of the general prohibition in section 19 of the Act or (if the appointed representative is a firm with a limited permission) in breach of section 20(1) or (1A) of the Act9; and
carries on the regulated activities for which the firm has accepted responsibility in a way which is, and is held out as being, clearly distinct from any of the appointed representative's other business:
Some of the controlled functions, as set out in SUP 10A.4.1 R15, apply to an appointed representative of a firm, other than an introducer appointed representative, just as they apply to a firm (see SUP 10A.1.15 R15). These are the governing functions and the customer function5. In the case of an appointed representative that also has a limited permission, an FCA required function may apply to it.9 As explained in SUP 10A.1.16 R15 and SUP 10A.3.2 G15 respectively:21515515515
the effect of SUP 10A.1.15 R15 is that the directors (or their equivalent) and senior managers (or their equivalent) of an appointed representative, other than an introducer appointed representative, must also be approved under section 59 of the Act for the performance of certain controlled functions;215
although the customer function applies5 to an appointed representative, the descriptions of the functions themselves do not extend to 2home finance mediation activity3,922 insurance mediation activity or credit-related regulated activity;9253599
sections 59(1) and 59(2) of the Act (Approval for particular arrangements) provide that approval is necessary in respect of a controlled function which is performed under an arrangement entered into by a firm, or its contractors (typically an appointed representative), in relation to a regulated activity.21
The approved persons regime applies differently to an appointed representative whose scope of appointment includes insurance mediation activity in relation to non-investment insurance contracts or credit-related regulated activity9but no other regulated activity and whose principal purpose is to carry on activities other than regulated activities. These appointed representatives need only one person performing one of the governing functions. This means that only one director (or equivalent) of these appointed representatives must be approved under section 59 of the Act for the performance of the director function, the chief executive function, the partner function or the director of unincorporated association function, whichever is the most appropriate (see SUP 10A.1.16 R15).2155
The approved persons regime for relevant authorised persons is in SUP 10C (FCA senior management regime for approved persons in relevant authorised persons), rather than SUP 10A. However, SUP 10A still applies to approved persons of appointed representatives of relevant authorised persons (see SUP 10A.1.16BR to SUP 10A.1.16DG and SUP 10C.1.8G for more about this).13
The rules and guidance relating to training and competence in SYSC 3 and SYSC 5 and 6 in TC for a firm carrying on retail business 6extend to any employee of the firm in respect of whom the relevant rules apply. For these purposes, an employee of a firm includes:
an individual who is employed or appointed by an appointed representative of a firm (whether under a contract of service or for services) in connection with the business of the appointed representative for which the firm has accepted responsibility.
A firm should take reasonable care to ensure that:
individuals who are its appointed representatives; and
individuals who are employed or appointed by appointed representatives (whether under a contract of service or for services);
who act in connection with the CBTL business of the appointed representative for which the CBTL firm has accepted responsibility satisfy the knowledge and competence requirements set out in paragraph 3 of Schedule 2 to the MCD Order.
7A firm must take adequate measures in order to avoid any negative impact of the activities of its tied agent not covered by the scope of MiFID (or relating to the equivalent business of a third country investment firm) could have on the activities carried out by the tied agent on behalf of the firm.
[Note: paragraph 1 of article 23(4) of MiFID]