On 6 September 2024, the FCA published a webpage setting out the findings of its review on how principals are embedding the rules for overseeing ARs, which were introduced in December 2022. The analysis involved a telephone survey with 251 principals and in-depth assessments of documentation from 23 firms. The areas the FCA questioned about are:

• how principals ensure their ARs do not act outside of their appointments;
• onboarding and termination processes;
• how principals monitor changes and growth at ARs; and
• whether principals delegate tasks or functions to their ARs.

The FCA found:

• Some firms were taking a tick-box approach to complying with its rules, relying on basic information like website checks, or using self-declarations from their ARs, to demonstrate effective oversight.
• One in five principals had not carried out a required self-assessment or annual review of their ARs as per SUP 12.6A. Out of the firms conducting reviews approximately half of these were of good quality. FCA also found that those principals involved in in-depth assessment had not properly documented their self-assessment or annual reviews, or took a tick box approach to completing them.
• Approximately half of principals were not regularly reviewing their AR agreements.
• A third of principals were not using data or management information to keep tabs on whether ARs were acting within the scope of AR agreements.
• Most firms had not changed their AR onboarding or termination procedures since the rules were introduced.

What should principal firms do in light of these findings?

The FCA states that it has followed up directly with firms in the review and will take swift action where it sees principals not meeting its standards in the future. It is asking principal firms to consider these findings and review their approach to AR oversight. In light of the FCA's findings, principal firms should consider the following for effective AR oversight:

• When it comes to self-assessment:
  • Having a written record showing compliance with its obligations completed within the last 12 months.
  • Assessing the effectiveness of the firm's arrangements for AR oversight and the adequacy of the firm's controls and resources.
  • Using a broad range of management information and adopting a RAG (red-amber-green) rating system.
  • Having a clear action plan for any material deficiencies or concerns with compliance identified in the self-assessment.
• For annual reviews consider:
  • Embedding consumer duty compliance into the review and assessing AR activity to prepare a full analysis of their activity and business to feed into the annual review.
  • Relying on a broad range of information about the AR and gathering appropriate evidence.
• Having clear AR agreements and effectively monitoring their ARs to ensure they act within scope including:
  • Conducting mystery shopping exercises and reviewing all new financial promotions for compliance.
  • Monitoring consumer facing materials and undertaking file reviews or observing interactions between ARs and consumers.