Prudential Regulation Authority Rulebook

This Chapter provides a brief explanation of how appointed representatives (ARs) carrying on mortgage mediation activities, insurance mediation activities, or both, are regulated. It will be helpful to firms that are, or are considering becoming, ARs. Such firms may also find it useful to read the factsheet Becoming an appointed representative. Most of the relevant rules are in SUP 12.

An AR is a person (this includes a firm) who carries on regulated activities and who, in doing so, acts under the responsibility of an authorised firm. There must be an express agreement to this effect and the authorised firm must accept responsibility in writing for what the AR does in the course of carrying on regulated activities. On this basis the AR does not need to be authorised by us. Our rules do not apply directly to an AR but everything the AR does (or omits to do) in carrying on the business for which the authorised firm has accepted responsibility is deemed to have been done (or omitted) by the authorised firm. An authorised firm must ensure that the prescribed details about each of its ARs appear on the FSA Register.

If an AR's insurance mediation activities are limited to only introducing and distributing non-real time financial promotions (see Part II, Chapter 2.1 and Part III, Chapter 3.2 for more on financial promotions) it can become an Introducer AR (IAR). For example, if a vet gives out information on pet insurance to customers and passes on the details of interested customers to an insurance intermediary, the intermediary might want to consider appointing the vet as its IAR. There is a more detailed explanation of when we consider introducing to be a regulated activity in the Insurance Mediation Perimeter Guidance at AUTH App 5.6.5 G to AUTH App 5.6.9 G (Exclusion: article 72C (Provision of information on an incidental basis)) and AUTH App 5.6.17 G to AUTH App 5.6.21 G (Exclusion from article 25(2) for introducing). Introducing and distributing non-real time financial promotions in relation to regulated mortgage contracts is unlikely to be a regulated activity (see AUTH App 4.5.10 G to AUTH App 4.5.19 G (Exclusion: article 25A(2) arrangements and introducing)), so a firm will not need to become an IAR because it carries on these activities.

An AR is not permitted to be authorised to conduct regulated activities and exempt from the need for authorisation at the same time. So, if your firm is already directly authorised by us, then it cannot become an AR unless it first cancels its permission.

A principal is an authorised firm that has a written contract with one or more ARs. A principal can be a product provider, intermediary or network. A principal can restrict its ARs completely, or in part, from acting on behalf of other principals.

A principal is responsible for ensuring that the business of its ARs complies with the relevant regulatory requirements. At all times the principal must have adequate systems and controls to ensure that its ARs are fully compliant and that they are able to deliver the same level of protection to clients as if clients had dealt with the principal directly (SUP 12.1.3 G). A principal must make certain assessments (relating, for example, to the solvency and suitability of the AR) before it appoints an AR and on an ongoing basis (see SUP 12.4.1 R to SUP 12.4.5 G). Less strict requirements apply where a principal appoints an IAR (see SUP 12.4.6 R to SUP 12.4.8 G). Additional assessments are required where a principal appoints an AR to carry on insurance mediation activities (see SUP 12.4.8A R to SUP 12.4.10 G).

As an AR, your firm can only carry on regulated activities that fall within the scope of your principal's permissions. Moreover, there are additional limitations as to what regulated activities an AR can undertake as shown in the following table (see also SUP 12.4.1 G (1)).

Regulated activities an AR can carry on:

Regulated activity	General insurance contract	Pure protection contract	Regulated mortgage
Arranging	Yes	Yes	Yes
Advising	Yes	Yes	Yes
Dealing as agent	Yes	Yes	N/A
Assisting in the administration and performance	Yes	Yes	N/A

An AR can provide a different service for different contracts, for instance it could advise on some products but simply arrange deals with regard to others.

An AR must enter into a written contractual agreement with its principal. This should cover arrangements to enable both parties to fulfil their regulatory duties and any other commercial arrangements (see SUP 12.5.5 R). The precise terms of the commercial arrangements a principal makes with its ARs are a matter for agreement between them.

An AR may wish to have more than one principal. We impose limits on the number of principals an AR may have as shown in the table below (see also SUP 12.5.6A R to SUP 12.5.6CG

Limits on the number of principals an AR can have:

Type of AR	Limit on number of principals?
AR carrying on mortgage mediation activities in relation to regulated mortgage contracts	Up to two principals - one for standard mortgages and one for lifetime mortgages
AR carrying on insurance mediation activities in relation to non-investment insurance contracts	No limits
IAR (insurance mediation activities)	No limits

If your firm agrees with its principal that it may act for other principals, all the principals must enter into a "multiple principal agreement" (SUP 12.4.5B R). Your firm cannot act on behalf of another principal until this agreement is in place. The multiple principal agreement must set out the relationship between the principals of your firm and the agreement must address the matters set out at SUP 12.4.5C. A multiple principal agreement is not required for IARs.

ARs are not restricted from holding client money that relates to their mortgage mediation activities. There are, however, rules governing the handling of client money by ARs carrying on insurance mediation activities (see the Client Assets Sourcebook (CASS), in particular CASS 5.2.3 R and CASS 5.5.5 R for the rules that relate to ARs holding money as agent and CASS 5.5.19 R to CASS 5.5.25 G for the rules that relate to ARs holding client money).

ARs, other than IARs, will usually need to have approved persons. Details of these requirements are in Part I, Chapter 6, and in particular paragraphs 6.3.1 to 6.3.3.

Like authorised firms, ARs are required to disclose their statutory status in certain letters (and their electronic equivalent) with private customers. This is explained in Part I, Chapter 5.

The following chapters of thus Guide are also relevant:

Approved Persons - Part I, Chapter 6.3

Statutory status disclosure - Part I, Chapter 5