The UK Appointed Representative Regime (ARR) enables certain businesses – Appointed Representatives (ARs) – to conduct UK-regulated activities without having to be authorised by the Financial Conduct Authority (FCA). Instead, a fully authorised firm (a Principal) accepts responsibility for the AR’s actions and compliance with regulatory requirements. This has proven a popular arrangement, especially for startups and smaller businesses. According to the FCA there are currently around 40,000 ARs with 3,600 Principals.

However, the FCA is concerned that ARs are a disproportionate source of UK conduct risk. For example, a high proportion of Financial Services Compensation Scheme (FSCS) pay-outs relate to ARs or Principals (61% or £1.1bn in the period 2018 to 2019). Principals also receive significantly more complaints per £1m of revenue than non-Principals.

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