The Financial Conduct Authority (FCA) has proposed a £10m fee for networks to aid its oversight of appointed representative (AR) firms.
Principal firms will be charged a flat £250 fee per AR firm, in order to raise £10m in the 2021/22 financial year.
In the FCA’s regulated fees and levies CP21/8 paper, it outlined that the increasing failings of principals – and oversight of their ARs – was draining its resources.
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The regulator has proposed that principal firms pay the AR periodic fee based on the number of their ARs included in the Financial Services Register on the first day of a fee-year, which is 1 April.
A statement from the FCA said: “Traditionally, most ARs used the delegated permissions of their principal to sell mainstream products and services – and this generally continues to be the case.
“However, we are now seeing ARs being used in a more diverse range of business models and sectors, including asset management and wholesale activities. Currently approximately half of all principals have just one AR.
“These developments in the use of the AR regime have increased the range of potential harms to consumers.”
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI), said: “It is disappointing that having acknowledged the huge spike in [Financial Services Compensation Scheme (FSCS)] costs, the FCA is also intent on increasing the cost burden on firms at a time of falling revenues.
“In apologising for having failed a number of consumers, it is again the good firms who remain who are picking up the bill.
“I am particularly concerned that having found issues in controls over [ARs] in the investments and general insurance space, a broad brush approach has been applied without consultation.
“To add a cost of £250 for each AR to a mortgage network without evidence of harm seems unfair.
“AMI will be challenging this rushed change to the rules and the cost to firms robustly.
“For what is another significant addition of new fee classes and costs, a five week response time leaves us very limited time to consult with our membership.”
Martin Stewart, chief executive of The Money Group, said: “It’s an interesting move by the FCA but I see it as more than being a revenue raising exercise.
“I think the industry would do well to read the room here. This is a progressive step on from other regulatory initiatives such as the Senior Manager Regime.
“My take is simple – the culture of the sector is being addressed albeit slowly. These bite-sized chunks will seem palatable at first, but I expect more of them and not less in the years and months ahead.”