In the UK, you can’t start a P2P lending platform without authorisation from the Financial Conduct Authority (FCA). While some types of crowdfunding, for example GoFundMe, do not require an appointed representative, others do.

Now, in 2021, crowdfunding platforms are still a relatively new instrument of digital financing. Regulations are still in their infancy, and although they are evolving all the time, there is still much that people don’t fully understand.

So, in the interest of demystifying an already convoluted and complex aspect of digital finance, we’re going to look at the FCA rules for becoming an appointed representative, guiding you through the risks of using an umbrella compliance provider.

Interested in learning more? Keep reading.

What Is an Appointed Representative?

In simple terms, appointed representatives are people, or a firm, that conduct regulated activities as an agent for a business that the FCA directly authorise. This is known as the AR’s ‘principal.’ It is a contractual relationship. The principal is responsible for making sure that appointed representatives comply with the rules and regulations of the FCA.

An AR’s Responsibilities

AR’s must fully understand and make sure that a business fully complies with all regulatory requirements. Any activities conducted outside this scope, will require AR’s to be authorised in their own right.

Principal firms should have access to a firm’s employees, premises, and records to conduct any necessary checks. These are made to make sure that an individual or the firm is financially stable and competent.

When you appoint an AR, you are responsible for:

  • The products they sell and arrange
  • The advice they provide customers
  • Making sure that customers are treated fairly

The FCA outlines six specific outcomes that denote customers are treated fairly. These are:

  1. Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture
  2. Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly
  3. Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale
  4. Where consumers receive advice, the advice is suitable and takes account of their circumstances
  5. Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard
  6. Consumers do not face unreasonable post-sale barriers imposed by firms to change products, switch provider, submit a claim or make a complaint

How to Become an Appointed Representative of the FCA

The FCA has a five-step process than AR applicants must follow to become an appointed representative. This is as follows:

  1. Deciding which regulated operations a company wants to conduct; choose a principal with the requisite skills and experience
  2. Deciding to choose either an appointed representative or an introducer AR (an individual or firm that only affects the introduction, but can pass on contact details to the broker or intermediary in relation to insurance)
  3. Choosing how many principals the company wants (based on the nature of the business and its clients)
  4. Researching what agreements need to be completed
  5. Asking the chosen principal(s) to inform the FCA of the appointment to appear on the official register

The Pros and Cons of Partnering with an Umbrella Compliance Provider

A crowdfunding umbrella licence firm can either concentrate on the licencing process or offer specific crowdfunding software. A crowdfunding business can be started under the license of such a compliance provider.


Generally, an umbrella compliance company can create and launch crowdfunding platforms, explaining everything that you need to know to you on all regulatory matters and guide you through often complex regulatory matters.

An appointed representative of the FCA can provide you with pre-launch support and post-launch consultancy, helping you to understand how to set up and operate a licenced crowdfunding platform completely hassle-free without the need for a ‘principal firm.’

The FCA says that these firms should take the responsibility of AR’s and responsible for making sure that they day-to-day operations are regulatory compliant.

Other Pros That Shouldn’t Be Discounted

There are other pros to partnering with an umbrella company. Well, with this arrangement you get:

  • A pre-built SaaS platform, which can have some small design customisation
  • A partnership with an expert compliance team
  • A process with minimal paperwork and reporting (as your compliance partner will complete this on your behalf)

Sounds good, right? There’s just one thing that you should remember: you don’t have to pass the entirety of your legal compliance over to a partner without having any personal oversight. Remember to keep an eye on any legal changes – you won’t regret it!

Now, as positive as the pros of using an umbrella company to launch crowdfunding platforms, the service isn’t without its cons. So, in the interest of being a transparent, customer-centric business, we’ve listed these below:

  • Potentially expensive service costs
  • Limited software flexibility and range of services that you can offer your investors and fundraisers
  • Limited scalability scope

Becoming an Appointed Representative of the FCA for Crowdfunding Platforms

Businesses wanting to enter the peer-to-peer market, should make sure that they are fully versed with all compliance regulations – and that they’re aware of any changes that regulators may introduce.

This is key to having a short and long-term business strategy that promotes growth and sustainability. Finding an umbrella compliance partner is essential.

To learn more about appointed representatives for crowdfunding platforms, or any of the financial services offered by Northern Provident, get in touch with us today on 02896 001616.