Advantages of Becoming an Appointed Representative

Acting as an Appointed Representative to a fully FSA authorised Principal, allows a firm to continue to handle insurance and associated regulated activities, without requiring to be directly authorised by the FSA.

The main advantage of being an Appointed Representative is that the firm does not need to pay fees to the FSA, FSCS and FOS, nor meet and maintain a minimum capital adequacy level, though the Principal would regularly require evidence that the Appointed Representative remains financially sound.

There is still a requirement to maintain compliance standards in accordance with the contract conditions set out by the Principal and hence the FSA rules, but responsibility for compliance still remains with the Principal.

The FSA Principal will therefore take on much of the burden of monitoring and implementing changes to the FSA regulations, albeit that as an Appointed Representative, the firm must still modify its own practices to take account of these changes.

The need to employ a compliance officer or engage an independent compliance firm is removed, as the Principal will take on these roles. Whilst representing further cost savings, there could be a charge made by the Principal’s compliance company for an initial report.

The FSA requires firms that administer insurance to demonstrate competency, including appropriate training. Partnering with a Principal will provide access to wider training facilities.

Whilst there may be no theoretical limit on the number of Principals an Appointed Representative may have, it is unusual for firms to work with more than one.

For Appointed Representatives, insurance is not normally the main focus of their business. Aligning their company with a specialist insurance supplier effectively reduces the possibility of insurance related mistakes being made by utilising the benefits of the Principal’s expertise.

The Principal will almost certainly make Professional Indemnity insurance a requirement for the Appointed Representative. However, exposure to the risk of a claim against the Appointed Representative should be much reduced.

Please call CHUResidentsline on 0800 281 235 or email info@residentsline.co.uk for more information.