Directly authorised vs appointed representative: how UK firms are regulated
What “directly authorised” means
A directly authorised firm has applied to the FCA and been granted its own permission to carry on specified regulated activities. That permission — a Part 4A permission under the Financial Services and Markets Act 2000 — sets out precisely which activities the firm may carry on and in relation to which investments or contracts. The firm appears on the Financial Services Register in its own right, is supervised by the FCA directly, pays its own regulatory fees and levies, and has to satisfy the regulator on an ongoing basis that it meets the threshold conditions and the FCA’s conduct standards.
Practically, direct authorisation means the buck stops with the firm. There is no third party standing between it and the regulator, and no third party whose commercial appetite determines what the firm is allowed to do. Apex Insurance Brokers Limited is directly authorised and regulated by the FCA, firm reference number 724952.
What an appointed representative is
An appointed representative is a person or firm carrying on regulated activity without its own authorisation, relying instead on the exemption in section 39 of the Financial Services and Markets Act 2000. The exemption only works where there is a written contract with an authorised firm — the principal — and the principal has accepted responsibility, in writing, for the AR’s regulated activity.
The consequence is not a technicality. Section 39 provides that the principal is responsible, to the same extent as if it had expressly permitted it, for anything the AR does or omits to do in carrying on the business for which the principal has accepted responsibility. Acts and omissions of the AR within that scope are treated as the principal’s own. A principal cannot outsource conduct risk by appointing an AR; it takes it on.
There is a narrower species too. An introducer appointed representative is limited to effecting introductions and distributing non-real-time financial promotions prepared by the principal. It cannot advise, arrange or deal in the way a full AR can.
SUP 12: what a principal has to do
The obligations on principals sit in SUP 12 of the FCA Handbook. The chapter runs from application and purpose through to record keeping, and the structure is worth knowing because it maps the lifecycle of an appointment:
Before the appointment, the principal must satisfy itself that the prospective AR is solvent, suitable and fit for the business it will carry on, and that the principal itself has adequate controls, resources and monitoring to oversee it. The contract must contain the terms SUP 12 requires, including the scope of business for which responsibility is accepted and the principal’s right of access to records and premises. Continuing obligations require the principal to keep monitoring the AR, not merely to vet it once. Notification rules govern what has to be told to the FCA and when. Termination and record-keeping provisions close the loop.
Because the principal carries the regulatory consequences, SUP 12 is written on the assumption that oversight is substantive: a principal is expected to know what its ARs are actually doing, not merely to hold a signed agreement in a drawer.
What changed in 2022
The FCA reviewed the AR regime and published Policy Statement PS22/11, “Improving the Appointed Representatives regime”, in August 2022. The rules came into force on 8 December 2022 and materially raised what is expected of principals:
Advance notification. A principal must notify the FCA at least 30 calendar days before an AR appointment takes effect, rather than reporting it after the event. The requirement applies to introducer ARs as well as full ARs.
An annual self-assessment. The principal must prepare a document setting out how it meets its responsibilities in relation to its ARs, and that document must be reviewed and signed off by the principal’s governing body at least every twelve months.
An annual fitness and propriety review. The principal must assess annually whether the senior people at each AR remain fit and proper to act in that capacity. This one does not extend to introducer ARs.
Annual data on ARs. Principals must report complaints data and revenue data for their ARs on an annual cycle, with revenue split between regulated activity, other financial activity and non-financial activity.
The practical effect is that being a principal is now a recognisable business line with its own governance, cost and reporting burden — and its own conduct risk.
Why the distinction matters to a client
Both models are lawful and both are supervised. The difference is where responsibility and scope are defined. With a directly authorised firm, the permission on the Register is the firm’s own and describes exactly what it may do. With an AR, the relevant scope is whatever the principal has accepted responsibility for — which can be narrower than the AR’s commercial ambitions suggest.
Checking is straightforward. The Financial Services Register shows a firm’s status, its permissions, its principal if it has one, and the dates of the relationship. Our wiki sets out how to check your own broker on the Register in a couple of minutes, and defines appointed representative in plain terms.
What the distinction does not tell you is quality. There are excellent ARs and indifferent directly authorised firms. It tells you who is answerable, and to whom, which is a different and narrower question.
Where professional indemnity fits
Insurance intermediaries have to hold professional indemnity cover or an equivalent guarantee. Where an AR is involved, the practical questions are whether the AR is named on the principal’s policy or carries its own, whether the limits are adequate for the business actually written, and whether run-off is addressed if the appointment ends. Because the principal is answerable for the AR’s regulated conduct, a claim arising from an AR’s advice can land on the principal’s own PI programme.
Related reading on broker duties and exposure: the broker’s duty of care, how broker negligence claims arise, dual agency and conflicts, placement and producing broker roles, managing general agents, and commission and fee transparency.
Conduct standards apply either way
Whichever route a firm takes, the FCA’s conduct expectations follow the customer, not the corporate structure. The Consumer Duty in PRIN 2A applies across the distribution chain, and a principal is expected to be able to evidence that its ARs are delivering good outcomes. Our notes on the Consumer Duty for insurance brokers, fair value assessments and when a small business counts as a retail customer set out how that plays out in practice, and the Conduct of Business Sourcebook covers the investment side.
Frequently asked questions
Is an appointed representative regulated by the FCA?
An AR is not authorised in its own right. It is exempt under section 39 of the Financial Services and Markets Act 2000 because an authorised principal has accepted responsibility for its regulated activity. The AR still appears on the Financial Services Register, showing its principal and the activities covered, and the FCA can and does act where a principal’s oversight of its ARs falls short.
Who is responsible if an appointed representative gets something wrong?
Within the scope of business the principal has accepted, section 39 makes the principal responsible to the same extent as if it had expressly permitted the act or omission, and treats the AR’s acts and omissions as the principal’s own. That is why a complaint or claim arising from an AR’s advice is normally directed at the principal.
What did the FCA change about appointed representatives in December 2022?
Rules made under PS22/11 took effect on 8 December 2022. Principals must give the FCA 30 calendar days’ notice before an appointment starts, prepare an annual self-assessment signed off by the governing body, review annually whether AR senior management remain fit and proper, and report annual complaints and revenue data for their ARs.
How do I tell whether my broker is directly authorised or an AR?
Search the firm on the Financial Services Register. A directly authorised firm shows its own permissions; an AR shows a principal firm and the dates of the appointment. Take the firm reference number from the firm’s own documentation rather than a search engine, and check that the name on the Register matches the entity you are actually contracting with.
Can a firm be directly authorised and also act as a principal?
Yes. Acting as a principal requires direct authorisation, and many authorised firms have one or more ARs. Doing so brings the SUP 12 obligations, the annual self-assessment and the AR reporting requirements described above, and it brings the section 39 responsibility for what those ARs do.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.