Brief
Inactive Appointed Representatives: Oversight Evidence for Principal Firms
Principal firms must maintain documented oversight of inactive appointed representatives, with clear REP025 explanations and timely relationship decisions.
Michaela Clarke
Operations & Compliance Coordinator
At a Glance
At a Glance: The FCA expects principals to maintain active oversight of appointed representatives even when they report no regulated activity, with documented monitoring, REP025 explanations and timely relationship decisions.
The FCA's review of inactive appointed representatives says principals still need effective oversight where an AR carries out no regulated activity and cannot rely on transaction oversight alone. It identifies website and marketing checks, Companies House alerts and monitoring of new regulated-business leads as examples of active oversight.
The evidence problem is therefore specific: the principal needs a clear REP025 explanation, monitoring that tests whether the recorded inactivity remains credible and a documented assessment of whether the relationship is still appropriate.
The Decision Firms Need to Make
Inactivity does not end oversight duties
The FCA makes clear that principals cannot rely solely on transaction monitoring for appointed representatives reporting no regulated activity. Firms must maintain active oversight through alternative means like website checks, Companies House alerts and lead monitoring, with documentation to support REP025 filings.
Documented relationship assessments required
Where an AR is not carrying out regulated activity, the FCA expects the principal to understand why and to consider and document whether the relationship remains appropriate. Website and marketing presentation are relevant because an inactive AR can still create a misleading impression about its regulatory status.
REP025 explanations must address inactivity
The FCA specifically highlights the need for clear explanations in REP025 filings when appointed representatives report no regulated activity. Principals should prepare evidence showing how they monitor and assess these relationships beyond transaction data.
Evidence to Prepare
MEMA's analysis is that the starting record should join the REP025 explanation to the underlying business evidence. For each inactive AR, the principal should be able to show the reason recorded, the checks performed, exceptions found, the relationship owner and the next decision date.
The review should distinguish genuine inactivity from inaccurate classification or reporting. Where monitoring does not support the recorded explanation, the matter should move to a documented relationship decision rather than being rolled forward as an unchanged status.
Build an inactive-AR register that joins the REP025 explanation to the relationship owner, last activity, monitoring performed and next decision date. Test the recorded explanation against website and marketing activity, Companies House alerts and potential regulated-business leads. Where the evidence is inconsistent, escalate a documented continue, suspend or terminate decision rather than repeatedly rolling the status forward. Keep Managing potential risks from inactive appointed representatives with the control design so each check can be traced to the FCA's current observations.
Who This Guide Is For
The FCA publication is directed to principal firms operating with ARs, including Introducer Appointed Representatives. This guide focuses on principals with ARs that report no regulated activity for a period of time or no regulated revenue in REP025.
It is most useful to the people who own REP025 reporting, AR monitoring and decisions to continue, suspend or terminate a relationship. Each role should work from the same evidence rather than maintain separate explanations for regulatory reporting and oversight.
MEMA Practical View
The FCA review gives senior management a concrete test: can the firm explain why the AR is inactive, show active monitoring beyond transaction data and demonstrate that the relationship remains appropriate? If any part is missing, the paper should identify the evidence gap and the decision needed.
MEMA recommends reporting unresolved REP025 explanations, inconsistent public status descriptions and overdue relationship reviews separately. A suspension should not become an indefinite holding state; the governance record should show its rationale, review point and the conditions for reinstatement or termination.
Senior management should see more than a count of inactive ARs. The oversight paper should explain why each relationship remains in place, whether the REP025 explanation is supported by monitoring and which exceptions require a continue, suspend or terminate decision. That turns inactivity from a static status into a documented principal-firm judgement.
How to Prepare
| Action | Owner | Status | Timing | Evidence |
|---|---|---|---|---|
| MEMA recommended action: reconcile each inactive AR's REP025 explanation to the underlying business record and document why the relationship remains appropriate. | AR Oversight Lead | MEMA recommended action | MEMA planning point: before the next REP025 submission or relationship review | SUMMARY; WHAT WE FOUND; NEXT STEPS - Managing potential risks from inactive appointed |
| MEMA recommended action: test website and marketing activity, Companies House alerts and regulated-business leads for a sample of inactive ARs, recording exceptions and follow-up. | Compliance Monitoring Lead | MEMA recommended action | MEMA planning point: during the next risk-based AR monitoring cycle | SUMMARY; WHAT WE FOUND; NEXT STEPS - Managing potential risks from inactive appointed |
| MEMA recommended action: make and evidence a continue, suspend or terminate decision where inactivity or monitoring findings call the relationship's appropriateness into question. | Principal Firm Executive Sponsor | MEMA recommended action | MEMA planning point: at the next documented relationship decision | SUMMARY; WHAT WE FOUND; NEXT STEPS - Managing potential risks from inactive appointed |
Source Evidence
| Source | Document type | Published | Why it matters |
|---|---|---|---|
| Managing potential risks from inactive appointed representatives | FCA good and poor practice review (Summary; What we found; Next steps) | 2026-04-21 | Provides current FCA observations on principal oversight, REP025 explanations, monitoring, suspension, termination and consumer-facing status descriptions. |
Disclaimer
This article is for general information only and does not constitute legal or regulatory advice. Firms should assess the application of regulatory requirements by reference to their permissions, products, customers and operating model.
How MEMA Can Help
MEMA can help firms translate regulatory change into practical controls, policies, monitoring activity and board evidence. Book a free scoping call to discuss what this development means for your firm.
MEMA advises on principal oversight, REP025 evidence and AR relationship decisions through its appointed-representative and principal-firm support.
Further reading: the FCA's 2026 compliance priorities.
Frequently asked questions
Does inactivity reduce a principal firm's oversight responsibility?
No. Managing potential risks from inactive appointed representatives says principals still need effective oversight when an appointed representative carries out no regulated activity, and that transaction oversight alone is insufficient. The absence of regulated transactions therefore changes the evidence a principal should examine; it does not remove the need to understand the AR's position, monitor relevant activity and decide whether the relationship remains appropriate.
What active monitoring does the FCA identify for inactive ARs?
The FCA review identifies website and marketing checks, Companies House alerts and monitoring for potential regulated-business leads as examples. A principal should select checks that fit the AR's business and risk, retain the result and investigate inconsistencies. MEMA recommends connecting those checks to the REP025 explanation so the firm can demonstrate that the recorded reason for inactivity remains credible.
When should a principal reconsider an inactive AR relationship?
Managing potential risks from inactive appointed representatives expects a documented assessment of whether the relationship remains appropriate and timely action where it does not. MEMA recommends defining review triggers such as unexplained activity, inaccurate public descriptions, repeated monitoring exceptions or an inactivity rationale that is no longer credible. The resulting decision should state the evidence considered, the accountable decision-maker and any suspension, termination or remedial action.
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