Brokers and insurers must not be panicked into accepting appointed representatives without conducting due diligence, said insurance law firm Reynolds Porter Chamberlain (RPC).
RPC partner Jonathan Davies said: “Some firms may seek appointed representative status because they fear it is too late to obtain direct authorisation, and others to avoid the perceived cost and bureaucracy of direct authorisation.”
He added: “Many insurers or brokers may feel threatened that if they do not agree to accept intermediaries as appointed representatives, they will lose the business from those appointed representatives.
“This needs to be balanced against the fact that accepting someone as an appointed representative imposes onerous obligations on the principal.”
Under the Financial Services & Markets Act, a firm is responsible for everything done by its appointed representative, including damages for negligence, regulatory action for mis-selling and loss of monies caused by fraud or theft, warned the law firm.
“Accepting appointed representatives without full due diligence is worse than writing a blank cheque,” said Davies.
