Safeguarding Your Firm: The Importance Of Making Sure Your Appointed Representatives Are Covered

There are around 40,000 appointed representatives (ARs) working under about 3,600 principal firms. And guess what? That number keeps climbing each year as more and more FinTechs look for quicker ways to go to market.

The Financial Conduct Authority (FCA) rules that Principal Firms must have adequate PII cover for all the activities of their ARs. Why? Because this insurance is there to protect customers if they need to make a claim against a company.

Whether you have a handful of ARs or a whole squad, it’s crucial to ensure that you and your ARs insurances cover what is needed.

Here, we look at why it’s so important to ensure that your ARs have their own PII and that your own is up to scratch.

Why is Professional Indemnity insurance important for appointed representatives?

By checking that your ARs are insured correctly, you safeguard your own financial stability and ability to keep operating. By ensuring that there is a PII policy in place by the AR, even if claims or lawsuits are brought against you for their negligence , these will be able to be redirected to their insurance.

It’s worth also remembering the impact on your own insurances too. When reviewing your own PII insurance, insurers will want to see that you’re on top of your risk management. You’ll probably be asked if your ARs are required to have their own insurance as part of your agreement. This shows insurers that you’re proactively managing risk and have a good understanding of the AR and Principal Firm relationship.

"When we receive submissions for principal firms we always request details of what their insurance requirements are for ARs, we’re unlikely to consider risks that don’t have this as part of their risk management strategy. ARs are separate legal entities to the principal firm and it is important for every company to have their own insurance policy. Principal firms are one step removed from the end customer, therefore when we look at both principal and AR firms we always want to ensure that there is adequate cover in place through the whole channel of distribution of the product or service."

- Steve Bowers, FinTech Development Manager at CFC

Free up your time to focus on what matters with Capsule

Making sure your ARs have PII is like putting the cherry on top of your risk management strategy. It’s not just about meeting FCA requirements; it’s about safeguarding your firm.

Of course, checking in on your ARs’ insurance policies, making sure they’ve got the right coverage, and giving yourself the peace of mind that comes with knowing you’re fully protected takes time. And that’s where we come in.

Capsule has partnered with a number of principal firms, conducting audits on their ARs’ insurances and reviewing their contracts to mandate PII. Part of this involves our Capsule Health Check, which provides our thoughts on your ARs’ current insurance programme and can be sent direct to them. We can also ensure that their insurances meet regulatory requirements (like covering FCA investigations and adhering to PSD2), as well as anything else you stipulate in your AR contracts.

To find out more, book a 30-minute meeting with our team.