SUP 12.6 Continuing obligations of firms with appointed representatives or EEA tied agents7

If at any time a firm has reasonable grounds to believe that the conditions in SUP 12.4.2 R, 2SUP 12.4.6 R or SUP 12.4.8A R2 (as applicable) are not satisfied, or are likely not to be satisfied, in relation to any of its appointed representatives, the firm must:

1. (1)

   take immediate steps to rectify the matter; or

2. (2)

   terminate its contract with the appointed representative.

7A firm that is a principal14 of a tied agent that is an appointed representative must monitor the activities of that tied agent so as to ensure the firm complies with obligations imposed under MiFID (or equivalent obligations relating to the equivalent business of a third country investment firm) when acting through that tied agent.

[Note: paragraph 3 of article 29(2)14 of MiFID]

11A firm that is a principal of an appointed representative that carries on MCD credit intermediation activity must monitor the activities of that appointed representative to ensure compliance with obligations imposed under the MCD (including those in MCOB and TC).

1. (1)

   A firm must not permit an appointed representative to hold client money unless the firm is an insurance intermediary acting in accordance with CASS 5.5.18 R to CASS 5.5.23 R (which include provision for periodic segregation and reconciliation)2.

2. (2)

   The firm must take reasonable steps to ensure that if client money is received by the appointed representative, it is paid into a client bank account of the firm, or forwarded to the firm, in accordance with :

   1. (a)

      CASS 4.3.15 R to CASS 4.3.17 R; or2

   2. (b)

      CASS 5.5.18 R to CASS 5.5.21 R unless acting in accordance with CASS 5.5.23 R (Periodic segregation and reconciliation); or72

      7
   3. (c)

      the MiFID client money segregation requirements.7

A firm must take reasonable steps to ensure that each of its appointed representatives:

1. (1)

   does not carry on regulated activities in breach of the general prohibition in section 19 of the Act or (if the appointed representative is a firm with a limited permission) in breach of section 20(1) or (1A) of the Act9; and

2. (2)

   carries on the regulated activities for which the firm has accepted responsibility in a way which is, and is held out as being, clearly distinct from any of the appointed representative's other business:

   1. (a)

      which is performed as an appointed representative of another firm or in accordance with a limited permission9; or

   2. (b)

      which:

      1. (i)

         is, or is held out as being, primarily for the purposes of investment or obtaining credit2, or obtaining insurance cover2; and

      2. (ii)

         is not a regulated activity.

12A CBTL firm must take reasonable care to ensure that:

1. (1)

   individuals who are its appointed representatives; and

2. (2)

   individuals who are employed or appointed by appointed representatives (whether under a contract of service or for services);

who act in connection with the CBTL business of the appointed representative for which the CBTL firm has accepted responsibility satisfy the knowledge and competence requirements set out in paragraph 3 of Schedule 2 to the MCD Order.

2A firm must take reasonable steps to establish and maintain effective systems and controls for ensuring that each of its appointed representatives complies with those terms of its contract which are imposed under the requirements contained or referred to in SUP 12.5 (Contracts: required times).

2[Deleted]

7A firm must ensure that its tied agent discloses the capacity in which he is acting and the firm he is representing when contacting a client or potential client or before dealing with a client or potential client.

[Note: paragraph 1 of article 29(2)14 of MiFID]

7A firm must take adequate measures in order to avoid any negative impact of the activities of its tied agent not covered by the scope of MiFID (or relating to the equivalent business of a third country investment firm) could have on the activities carried out by the tied agent on behalf of the firm.

[Note: paragraph 1 of article 29(4)14 of MiFID]

7If a UK MiFID investment firm appoints an EEA tied agent, SUP 12.6.1 R, SUP 12.6.1A R, SUP 12.6.5 R and SUP 12.6.11A R apply to that firm as though the EEA tied agent were an appointed representative.

14If a firm appoints a MiFID optional exemption appointed representative or a structured deposit appointed representative, that firm must:

1. (1)

   monitor the activities of the appointed representative to ensure that the firm complies with those obligations which implement provisions of MiFID and to which it is subject when acting through its appointed representative;

2. (2)

   ensure that its appointed representative discloses the capacity in which it is acting and the firm it is representing when contacting a client or potential client or before dealing with a client or potential client; and

3. (3)

   take adequate measures to avoid any negative impact that the activities of its appointed representative not covered by the scope of MiFID could have on the activities carried out by the appointed representative on behalf of the firm.