Brooklands Fund Management Responds to FCA Review on Inactive Appointed Representatives
Brooklands Fund Management Limited welcomes the Financial Conduct Authority’s recent publication on managing risks associated with inactive Appointed Representatives (ARs). The review provides valuable insight into the FCA’s supervisory expectations and reinforces the importance of robust governance, oversight and reporting within principal firm models.
As an FCA‑authorised principal firm, Brooklands views this publication as a clear signal of the regulator’s continued focus on the AR regime, particularly in relation to oversight quality, data accuracy and the identification of emerging conduct risks.
FCA focus: inactivity as a supervisory risk indicator
The FCA’s review highlights that periods where ARs generate no regulated activity should not be assumed to be low risk. Instead, inactivity is increasingly viewed as a “key supervisory indicator” potentially signalling weaknesses in a principal firm’s governance, monitoring and risk management framework.
The FCA reiterates that principal firms remain fully accountable for the activities of their ARs, including circumstances where ARs are not actively generating regulated revenue. This reinforces the expectation that oversight must extend beyond transaction monitoring and be supported by a clear understanding of each AR’s business model, activity profile and strategic purpose within the network.
For firms operating introducer, corporate finance or alternative investment structures, this is particularly relevant where revenue generation may be episodic or long‑dated.
Strengthening oversight and lifecycle management of ARs
A central theme of the publication is the need for active and data‑led oversight throughout the lifecycle of the AR relationship.
The FCA highlights examples of good practice, including clear expectations at onboarding, enhanced monitoring during early‑stage inactivity, and proactive engagement where activity levels diverge from expectations. Conversely, poor practice was identified where firms were unable to explain AR inactivity or failed to reassess the appropriateness of relationships over time.
The FCA also emphasises that suspension should only be used as a short‑term measure and not as a substitute for meaningful reassessment. Where AR relationships are no longer appropriate, firms are expected to take timely action, including termination and appropriate notifications.
Brooklands considers structured lifecycle management and clear governance triggers to be critical components of an effective AR oversight framework.
Data quality and regulatory reporting expectations
The publication places particular emphasis on the accuracy and clarity of REP025 regulatory reporting.
The FCA observed instances of misclassification of regulated and non‑regulated revenue, inappropriate attribution of income, and insufficient explanations for periods of inactivity. This reflects a broader shift towards data‑led supervision, where regulatory returns are used to identify outliers and target supervisory engagement.
For principal firms, this reinforces the importance of strong data governance, consistent classification methodologies and clear audit trails to support regulatory submissions.
Brooklands recognises that high‑quality regulatory reporting is a foundational element of effective regulatory engagement and risk management.
Consumer communication and conduct considerations
The FCA has also identified risks relating to how ARs present their regulatory status to consumers. In particular, cases were observed where ARs incorrectly described themselves as “FCA authorised” or used misleading terminology.
Such practices create a risk of consumer misunderstanding and may give rise to a “halo effect”, where the association with an authorised principal firm implies a level of regulatory protection that is not aligned with the AR’s activities.
This reinforces the importance of ensuring that all financial promotions and disclosures are clear, fair and not misleading, and compliant with GEN 4 requirements.
Contractual frameworks and regulatory alignment
Robust AR agreements remain a core component of effective oversight. The FCA identified deficiencies in some agreements, including a lack of clarity regarding principal responsibility and failure to incorporate required regulatory provisions.
Firms are therefore expected to ensure that AR agreements are fully aligned with FSMA and SUP 12 requirements and support effective control over AR activities throughout the relationship lifecycle.
Why Brooklands is well positioned
Brooklands Fund Management provides regulatory hosting, operational infrastructure and compliance solutions to investment managers across a broad range of strategies and jurisdictions.
As an FCA‑authorised principal firm, Brooklands has developed a comprehensive approach to AR oversight, underpinned by:
- Strong governance and clearly defined accountability
- Data‑driven monitoring and reporting frameworks
- Robust onboarding and lifecycle management processes
- Proactive engagement with regulatory developments
This enables Brooklands to support clients in navigating evolving regulatory expectations while maintaining high standards of conduct, transparency and operational resilience.
Looking ahead: continued focus on the AR regime
This publication sits within the FCA’s broader programme of reform and enhancement of the AR regime. It signals that firms should expect continued supervisory engagement and increasing expectations around oversight quality, data integrity and governance.
Brooklands welcomes the clarity provided by the FCA and remains committed to maintaining a high‑standard principal firm model that supports innovation while safeguarding market integrity and consumer outcomes
