When appointed representatives undertake regulated financial activities on behalf of an authorised firm, they may benefit from being directly authorised.
An appointed representative (AR) should consider becoming directly authorised if they meet certain criteria.
Increasing size
When an AR has become larger than its principal it may be time to consider becoming directly authorised. Similarly, if an AR has a larger income than the principal, making the principal reliant on the AR for revenue, this could drive poor decision-making.
Conflicts within business model
Conflicts of interests in the business model include people having overlapped shared roles in both the principal and AR, or when an individual’s personal interests could impact their ability to perform effective oversight (financial or social factors). This could lead to lack of oversight.
Misalignment between the AR and principal
ARs may consider becoming directly authorised if their business does not align with a principal firm’s model or direction.
How to give your principal notice
Your principal might say you can’t carry out regulated activities during your notice period.
Applying and getting approved for direct authorisation doesn't override any contractual obligations you owe to your principal – these are things you should discuss with them and should be in your principal/AR agreement.
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1
Tell your principal(s) you may need them to provide a reference
Let them know in advance that you're applying for direct authorisation, and that we might contact them for a reference to process your application. Please do this in good time to avoid delays with your application.
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2
Arrange access to your client files
Your principal is responsible for any regulated business you carried out while you were its AR. You'll need to agree with your principal how they can have direct access to your client files in case of a client complaint. Typically, we expect you to put an agreement in place in respect of future liabilities that arise.
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3
Check you can continue dealing with your existing customers
If you want to carry on dealing with your existing customers, check that your agreement with your principal allows you to do this.