"To duplicate this time and investment would be grossly inefficient. The reduced fee of £75 for IARs is a sensible and proportionate cost."
In April, the regulator announced plans to introduce a new fee to networks for each of their appointed representatives at a flat rate of £250 per AR.
The regulator said its recent reviews of the general insurance and investment sectors identified "significant shortcomings" in principal firms’ understanding of their regulatory responsibilities for their ARs.
However, respondents to the consultation paper said that introducer ARs should not be included as their activities are limited and therefore pose a lower risk of harm.
In response, the FCA has reduced the level of the IAR fee to £75 with the £250 fee now only applying to full ARs. The move is expected to save firms around £2.8m.
The FCA admitted that this new proposal "attracted the majority of the feedback" it received on FCA fees, with six trade bodies commenting.
The Association of Mortgage Intermediaries (AMI) expressed its "deep concern" over the approach and design of the proposal.
Other respondents argued that it should have been first consulted on in the November 2020 consultation paper so firms could prepare.
Additionally, firms raised concerns that the new fee will "likely be passed on to the ARs" which will increase their costs and "make direct authorisation more attractive". One respondent questioned if the FCA would be able to manage such a migration from indirect authorisation to direct authorisation.
In its latest policy statement, the FCA said: "IARs are limited to making introductions and distributing financial promotions. We agree that the risk of these limited activities giving rise to harm is lower than for full ARs. While data indicates that Principal firms with mainly IARs generate similar levels of FOS complaints to those with mainly full ARs it is much harder to demonstrate that IARs are a cause of that harm because of their narrower, introductory only role.
"We do see issues where IARs use their registered status with the FCA as a ‘legitimising halo’ and then carry on other activities or offer services which are unregulated or not permitted under, or linked to, the Principal firm’s permissions.
"Our work programme will include work to better understand whether IARs are a significant driver of harms, and if so, address them. Principal firms therefore need to exercise robust oversight of IARs to address the risk of harm that they can pose. In recognition, however, of the limited activities IARs, by definition, can undertake we have decided to reduce the fee Principal firms will pay for their IARs from the proposed £250 to £75."
Louis Alexander, CEO at Payl8r, commented: “The fact the FCA has listened to industry feedback and has revised the payment structure it proposed in April is fantastic news for the sector, especially those small IRAs who may not have been able to meet these costs.
“We recognise the need for the FCA to have a fee structure in place that enables it to monitor both IRAs and Appointed Representatives (ARs), but we felt very strongly that the FCA’s fee structure wasn’t right and didn’t take into the account the time and large costs that regulated and ethical firms like ours already undertake in on-boarding and continually monitoring our IAR network. To duplicate this time and investment would be grossly inefficient. The reduced fee of £75 for IARs is a sensible and proportionate cost.
“As one of the most established businesses in this sector we see it as part of our role to work alongside regulators to continually evolve policies to ensure that customers can be given money affordably and without risk. We look forward to working alongside the FCA in the future to shape and evolve regulation in the buy now pay later sector.”
Simon Harrington, senior policy adviser at PIMFA, added: “We welcome the FCA's decision to introduce a much lower fee for Principals to the one that it proposed in its initial consultation and which PIMFA strongly disagreed with.
“But our concerns around the provenance of the flat fee have not been assuaged. It is still unclear what the FCA hopes to achieve through their undefined market study, and the largest firms with superior controls will still be penalised.
“However, the FCA have clearly listened to our concerns and we look forward to working with them closely on ensuring that they can gain comfort from the Appointed Representative model, which works well for the vast majority of firms and clients."
