Becoming an Appointed Representative

Written by

Helen Garnham

Helen Garnham is the Operations Director at Consumer Credit Compliance, and has been leading the firm since May 2021. Her team brings a vast array of diverse knowledge, skills and experience to the table, all of which ultimately compliment and support what Consumer Credit Compliance is about and its ability to thrive as a Principal firm. Helen has experience working across a range of industries including legal, financial, automotive and education.

Wednesday 13th September 2023

Retailers looking to offer finance, which is a regulated activity, will need authorisation from the Financial Conduct Authority (FCA). Applying for either limited or full FCA permission can be a potentially challenging process, but there is another option for retailers. Becoming an Appointed Representative (AR) allows you to partner with a fully authorised Principal firm (with the appropriate permissions) that will take full responsibility for your compliance with FCA regulations. This can be a more cost-effective and less complex way to start offering finance.

In this article, Helen Garnham, Operations Director at Consumer Credit Compliance, gives an overview of why some retailers choose to become an Appointed Representative and whether this might be a suitable option for your business.


What is an Appointed Representative?

Becoming an Appointed Representative allows retailers to carry out regulated activities (such as offering retail finance) under the regulatory umbrella of a Principal firm such as Consumer Credit Compliance.

This Principal firm is directly authorised by the FCA and is ultimately responsible for overseeing the regulatory compliance of any business they appoint. They must ensure that the Appointed Representative adheres to FCA regulations, from the products they sell to the way they treat customers.

Which retailers should consider becoming an Appointed Representative?

Any retailer that meets the FCA’s guidelines and requirements can choose to become an Appointed Representative rather than seek direct FCA authorisation.

However, the option to become an Appointed Representative is perhaps most suitable for firms considering offering point of sale credit to customers for the first time. Becoming an AR may also be a good stepping stone for retailers working towards obtaining full or limited FCA permission. You could start offering retail finance as soon as you are approved as an AR, while you wait to become directly authorised.

Do be mindful that each Principal firm has its own due diligence process that you must meet before they will decide to take responsibility for the regulatory compliance of a retailer. The Principal firm will need assurance that a retailer’s business operations meet its own compliance standards and those of the FCA too.

The benefits of becoming an Appointed Representative

Some retailers may find that becoming an Appointed Representative is preferable to obtaining FCA authorisation. This could be due to a number of factors, such as:

1. Simplified route to carrying out regulated activities

Obtaining FCA authorisation can be a challenging process, particularly for those not familiar with dealing with the FCA. Becoming an Appointed Representative can be a simpler and less time-consuming process in comparison.

2. Cost-effective compliance

Becoming an Appointed Representative could reduce costs associated with both the application process and ongoing compliance.

While the Principal firm will charge you for becoming an AR and for the ongoing use of its permissions and compliance oversight, applying for direct authorisation could be more expensive and resource intensive – particularly when you take into account the annual administrative fees and work associated with FCA reporting.

3. Access to compliance experts

As an Appointed Representative, you can benefit from the support of your Principal firm’s compliance experts. FCA regulations can be extremely complex to navigate, but compliance experts are adept at dealing with regulatory matters and can help to guide you through any questions or issues you have.

4. Focus your energies on your business

Obtaining FCA permissions requires ongoing reporting to ensure compliance is maintained, which can be a time-consuming task for any business. Allow an authorised firm to take on the majority of your compliance responsibilities, so you can spend more time and energy on building your business.

It’s worth mentioning, though, that while you might not need to report data directly to the FCA, Principal firms do. That means you will need to provide your Principal firm with information they request on an ongoing basis to satisfy their compliance oversight requirements.

5. Enjoy greater peace of mind

All Appointed Representatives have regulatory obligations, though the responsibility for compliance ultimately lies with the Principal firm. This can reduce your exposure to certain risks, as your Principal firm will help to ensure you remain compliant.

6. Start offering finance sooner

Offering retail finance can attract more customers, in turn driving sales and increasing conversions. Understandably, retailers want to get in on the action sooner rather than later. Yet obtaining direct FCA authorisation can be a lengthy process.

Becoming an Appointed Representative may well allow you to start offering regulated services sooner, as you won’t need to wait for full FCA permission. This could be ideal for either retailers who’d like to test the waters without committing to a costly and complex application process, or for use as a stepping stone while working to obtain FCA authorisation.

Potential downsides of becoming an Appointed Representative

The main disadvantage of becoming an Appointed Representative is the control a Principal firm may exercise over aspects of your business practices, in particular Financial Promotions. The Principal firm must make sure business activities align with regulatory framework, ensuring ongoing compliance at all times. For example, a Principal firm could need access to your staff, premises and confidential records, which must always be accurate and well-maintained.

It’s also a common misconception that becoming an Appointed Representative is ‘easier’ than being directly authorised by the FCA. However, you will still need to demonstrate that your business conducts regulated activities in a compliant manner.

The Principal firm may require you to undertake detailed audits, ensuring customers are treated just as they would be if you were directly authorised by the FCA. Principal firms are scrutinised by the FCA and their own business can be impacted by the actions of their ARs, so Principal firms are extremely selective of which businesses they appoint and allow to utilise their permissions.

How do retailers become an Appointed Representative?

To become an Appointed Representative, retailers should follow these steps:

1. Establish a relationship with an authorised Principal firm

Find a fully authorised Principal firm you trust, with the correct permissions and that can meet your requirements.

If you partner with a retail finance provider such as Novuna, they may be able to put you in touch with suitable compliance experts.

2. Go through a due diligence process

Before accepting you as an Appointed Representative, the Principal firm will conduct an assessment of your business including your business plan, financial projections and track record of compliance measures. This is to ensure your business operations are suitable for an AR arrangement, and your activities meet the Principal firm’s compliance standards and that they have the correct permissions in place too.

3. Enter into a contractual agreement

The Principal firm and AR will agree on the terms of their agreement, formalising the relationship between the two parties.

4. Submit applications to the FCA

The FCA will need to approve the appointment of any Appointed Representative Firm and their Approved Person to assess the suitability of the arrangement and ensure the AR meets the necessary regulatory requirements. However, the Principal firm will submit the applications to the FCA on behalf of the retailer, so this shouldn’t be too much of a time burden for you as the AR.

5. Train your team

The Principal firm may require an Appointed Representative to take part in compliance training, to ensure key members of the business (particularly Approved Persons) are familiar with regulatory requirements. This could be on an ongoing annual basis too or as and when there are regulatory changes or updates.

6. Begin offering retail finance

As a newly Appointed Representative, you will now be able to carry out regulated activities such as offering retail finance. The Principal firm will take responsibility for overseeing your regulatory compliance, though you must cooperate fully and provide all necessary information so the Principal firm can carry out ongoing oversight to ensure compliance.

Your Appointed Representative FAQs answered

Are Appointed Representatives regulated by the FCA?

Yes, Appointed Representatives are regulated by the FCA. You won’t need to be directly authorised by the FCA, though, as your fully authorised Principal firm will be responsible for overseeing regulatory compliance and reporting to the FCA in respect of your business practices.

This means the AR will still need to conduct any regulated activities in a compliant manner that meets the FCA’s regulatory requirements, though it is the Principal firm who is ultimately responsible for ensuring that its Appointed Representatives comply with FCA rules.

Does an Appointed Representative need an Approved Person?

Yes, as part of the FCA’s regulatory framework, an Appointed Representative requires one or more Approved Persons who meet the “fit and proper” requirements to perform their role. Approved Persons are usually individuals in positions of authority such as directors, partners or senior managers. They must be financially sound and have the necessary skills and experience to ensure that the business complies with FCA regulations. The name of the Approved Person will appear on the FCA register alongside the Appointed Representative Firm.

How long does it take to become an Appointed Representative?

Under the new AR regime that came into effect in December 2022, there is now a 30-day pre-notification period for AR appointments. So, it can take anywhere from weeks to months to become an Appointed Representative, which is typically much quicker than obtaining direct FCA authorisation.

The length of time it takes to become an Appointed Representative will depend on several factors, including how complex your business activities are, how ready you are to undergo the application process, the availability of willing Principal firms, the responsiveness of communications between yourselves and the Principal firm, and the response times from the FCA.

A Principal firm such as Consumer Credit Compliance will be able to guide you through the process and advise a more accurate timeline based on your business’s individual circumstances. You can contact the team by emailing info@consumercreditcompliance.co.uk or calling 01423 613335.


Are you ready to start your retail finance journey?

Whether you’re already working with compliance experts or you’re looking to take the first step, our team can help you.

It’s a common misconception that you must hold individual FCA authorisation or be an Appointed Representative before looking for a retail finance provider. However, we can help you get set up behind-the-scenes, train your team and guide you through the process so you’re ready to start making the most of your new finance offering as soon as you’re authorised to do so.

Here at Novuna Consumer Finance, we don't act as a Principal firm for our partners. Instead, we recommend trustworthy third parties. When a retail finance partner becomes a retailer's Principal firm, they are able to restrict who that retailer partners with to offer finance, which can complicate the partnership and cause unnecessary frustrations. That simply isn't our style. We pride ourselves on responsible lending and prefer our partners to become an Appointed Representative of an impartial third-party firm. We want our partners to choose to work with us and enjoy doing so.