FCA Review: managing risks from inactive Appointed Representatives

On 21 April 2026, the Financial Conduct Authority (FCA) published a webpage entitled "Managing potential risks from inactive appointed representatives." This sets out examples of good practice and areas for improvement as regards inactive Appointed Representatives (ARs).

The FCA, using two years of regulatory data, assessed whether principals:

• Were able to give clear reasons for any absence of income from regulated activities.
• Were reporting AR activity to the FCA accurately.
• Could evidence effective oversight of their ARs' businesses.

Overall takeaways for firms

• Actively and appropriately engage with ARs through robust oversight, data quality and governance, including additional measures where an AR is inactive.
• Accurately report AR‑generated revenue and provide clear reasons for inactivity in REP025.
• Continuously monitor the appropriateness of AR relationships and take timely steps to:
  • Suspend or terminate where relationships are no longer appropriate.
  • Ensure the FCA Register remains up to date and the principal's risks are mitigated.

FCA Findings

1. Lack of AR regulated revenue reported to the FCA

• Some business models naturally show periods of no reported regulated revenue (e.g. ARs whose core business is unregulated, or where income accrues over long periods).
• In other cases, apparent inactivity reflected weaknesses in classification and reporting, not a genuine absence of regulated activity.

Good practice

Clear expectations and understanding of AR activity

• At onboarding, principals set expectations for the level and timing of regulated activity and apply enhanced monitoring where these are not met.
• Principals can explain why ARs are not carrying out regulated activities (e.g. not yet started, activity expected to build over time, or primarily non-regulated business) and, where an AR is not undertaking any regulated activity, assess and document whether the relationship remains appropriate.

Active, data led oversight and early intervention

• Principals maintain ongoing, data driven monitoring of ARs' businesses, including:
  • Alerts for changes in Companies House records.
  • Regular review of AR websites and marketing materials.
    • Monitoring of new regulated business leads.

• ARs with no regulated activity are identified early, with prompt engagement to determine whether inactivity reflects business circumstances or wider suitability concerns, and to decide whether to support, reassess or exit the relationship.

Key priorities for firms

• Correctly classify and attribute regulated income to the AR in REP025 (not to the principal or as "unregulated").
• Be able to explain clearly why an AR is not generating regulated revenue.
• Provide specific, plain‑language explanations in REP025 Column F, avoiding generic terms such as "not trading" or "no business introduced".
• Treat unexplained inactivity as a warning sign of weak governance, monitoring and risk management, and a potential source of consumer harm.

Areas for improvement

Lack of engagement with inactive ARs

Some principals allow ARs to remain in their networks and on the FCA Register for long periods without any regulated activity and without reassessing whether the relationship remains appropriate.

Key priorities for firms

• Proactively identify and review inactive ARs, rather than leaving them in place indefinitely.
• Reassess the relationship, considering the risk of consumer harm and the "halo effect" of remaining on the Register.
• Use suspension only as a short term, documented measure with a clear rationale, timeframe and conditions for reinstatement, and notify the FCA in line with SUP 12.7.7R.
• Where issues cannot be resolved within a reasonable period, move to termination rather than waiting for contractual end dates.

2. Insufficiently monitoring consumer‑facing materials

Some principals do not adequately monitor how ARs present themselves to consumers, and the FCA has seen ARs incorrectly describing themselves as "FCA authorised" or "Authorised Representative", risking misleading consumers about regulatory status.

Key priorities for firms

• Regularly review AR websites and marketing materials to ensure:
  • ARs do not claim to be "FCA authorised".
  • Statutory status disclosures comply with GEN 4 and GEN 4 Annex 1.

• Ensure all communications are clear, fair and not misleading, particularly where ARs have not actively carried on regulated activities for some time.

• Provide and enforce guidance to ARs on correct regulatory status wording and follow up to ensure changes are implemented.

3. AR agreements need to meet regulatory requirements

Some AR agreements reviewed did not meet regulatory requirements, for example by failing to clearly allocate responsibility for AR regulated activities or omitting required terms under section 39 FSMA and SUP 12.5

Key priorities for firms

• Review and, where necessary, amend AR agreements to ensure:
  • The principal's responsibility for AR regulated activities is clearly set out.
  • All required terms under FSMA and SUP 12.5 are included.
• Ensure agreements support effective oversight and control throughout the lifecycle of the AR relationship.