Harper James advises businesses on financial services regulation, including the legal structure and operation of appointed representative arrangements under the laws of England and Wales. An appointed representative (AR) carries on regulated activities under the responsibility of an authorised firm, known as the principal, rather than holding direct FCA authorisation for those activities.
Before drafting, identify the exact activities the AR will perform and confirm that the principal has permission to carry them on. The agreement should state whether the arrangement covers advising, arranging, dealing, insurance distribution, credit-related activities or another regulated service. It should also identify the products, customer groups, trading names, territories and distribution channels included within the scope. The agreement must not suggest that the AR is directly authorised, and marketing materials must describe the relationship accurately. The principal remains responsible for regulated activities conducted within the AR arrangement, while the AR must comply with the obligations that apply to its own business and conduct.
The agreement should explain how the principal will assess and monitor the AR. Key provisions cover initial and continuing due diligence, competence and training, compliance policies, financial promotions, customer communications, complaints, record keeping, data protection, conflicts of interest and regulatory reporting. The principal should have access to relevant books, systems, personnel and premises, together with rights to review files, test controls and require remedial action. The agreement should also allocate responsibility for Consumer Duty outcomes where relevant, including customer understanding, support, product governance and the avoidance of foreseeable harm. Operational details matter: the document should specify reporting frequency, named contacts, approval processes and the records that the AR must retain.
The parties should agree how the AR will be paid and how fees, commissions, clawbacks, client money and chargebacks are handled. The agreement should address professional indemnity insurance, minimum financial resources, tax, third-party suppliers and responsibility for losses caused by misconduct or breach. Indemnities require careful drafting because broad wording does not replace effective oversight and insurance. Check whether the AR will handle client money, hold customer assets or receive payments. If so, the agreement must reflect the applicable FCA requirements and establish appropriate controls. It should also state who owns customer relationships, data, records and intellectual property, particularly if the arrangement ends.
A practical agreement includes termination rights for regulatory breach, loss of permission, insolvency, failure to maintain insurance, serious customer harm and repeated control failures. It should provide for suspension of activities while an issue is investigated, an orderly transfer of customers, continued complaint handling, access to records, removal or correction of financial promotions, and notifications to the FCA where required. Include provisions for notice periods, post-termination cooperation and the treatment of outstanding commissions. Before signing, the board or compliance lead should confirm that the principal has completed its due diligence, the proposed activities fit its permissions, the agreement matches the actual operating model, and both parties have a documented process for ongoing monitoring.