Feeling ‘All at Sea’​ when it comes to Regulation? Could becoming an Appointed Representative be your lighthouse?

Could becoming an Appointed Representative be your lighthouse?

Regulation can be scary! There is no doubt about that and it can be particularly unnerving if it’s a notion that is entirely new to you. For some start-ups and SMEs, compliance can feel like an obstacle, preventing them from doing what they do best – running their business. That is when becoming an Appointed Representative might be the answer. As an AR you effectively operate your business under the regulatory ‘umbrella’ of a firm already regulated by the Financial Conduct Authority – known as the ‘Principal firm’.

Timing can be a problem. All too often we meet start-up firms who have had their excellent business idea, carefully planned marketing, branding, finance and web design but realised too late that what their new venture does has led them into a regulated space. The plethora of hoops they find themselves having to jump through before they can launch and operate lawfully come as a shock, not to mention the additional cost they hadn’t budgeted for.

That said, you don’t want to engage with a Principal firm too soon either or you could find yourself paying fees before you are ready to launch. Do your research early, so that you gain some foresight into the process of being on boarded as an AR and can factor timescales and costs into your business plan.

Don’t commit too soon, explore the market to make sure you find a Principal that is a good fit for you and your business. By good fit I mean more than just one that suits your budget and has the necessary permissions, look for a firm that you feel you will be able to work with over the medium term as you will be connecting with them regularly, perhaps daily in the beginning.

What are the potential benefits of all this? Well you can normally get started as soon as you have engaged with a Principal. A good Principal will carry out due diligence on you and your business, but this process is far quicker than making a direct authorisation application to the FCA. It also makes commercial sense. A Principal firm will charge you a fee of course, but the upfront costs involved in becoming directly authorised would be higher, and you wouldn’t be able to generate any revenue while you wait to become authorised.

But by FAR the biggest benefit is the support an experienced Principal firm should provide you and your fledgling business.

The right Principal firm will guide you through the rules and regulations as you embark on your new venture. They should reassure you that although vast and sometimes confusing they are not insurmountable. Like most things in life they are about forming new habits, following certain processes and being open to adapt where necessary.

Remember that regulation needn’t be a road block to success. In fact we believe that regulation can work FOR you. Done right, it will minimise the risks to your business, help you maintain a good reputation and help build a loyal customer base that trust you will treat them fairly. Everybody wins!

Marie Howley is a co-founder of Enterprise Incubator and Consultancy LLP, a firm providing compliance support to regulated financial services firms in the UK and EEA.

Telephone: 020 7843 0478

Email: mhowley@enterprise-ip.com