Thornbridge Investment Management, a well-respected London-based provider of hosted fund management and regulatory umbrella services, has shared insights into the importance of working with a good, well-resourced regulatory host.
The firm operates a boutique-style service, ensuring clients have direct support from the team of professionals. It works to ensure they have the necessary permissions, compliance, and knowledge to establish, launch, and run a fund with ongoing assistance and supervision.
Spotlighting the Core Need for Good Practice in Regulatory Hosting
Many companies keen to establish a presence in the UK or extend their services to include activities that fall under the scope of Financial Conduct Authority (FCA) regulation, consider regulatory hosting. The appointed representative regime, where a suitably skilled provider like Thornbridge provides clients with the ability to offer regulated services, can act as an efficient route to market.
For many, coming under the wing of a regulatory host, which acts as the principal firm, offers a strategic way to gain experience and familiarity with the UK's regulations without the burden of trying to apply for direct authorisation as a first step.
Regulatory hosts take on many of the responsibilities linked with compliance oversight and oversee activities with regular communications, analyses, risk appraisals and reviews to ensure the right controls and systems are in place and that all services offered remain compliant.
Raising Awareness of the Importance of Selecting a High-Quality Regulatory Hosting Provider
As noted by Thornbridge, the challenge is that delegating responsibility for the oversight of regulated activities is not a decision firms should take lightly. They must have the assurance that their chosen host meets and ideally exceeds the best practice standards in place.
Any poor practice on the part of the host can lead to preventable harms, from interruptions to the client’s business and reputational damage that impacts their credibility and future prospects.
Working with an experienced, well-resourced regulatory provider is regarded as vital for any business of any size considering operating as an appointed representative.
Regulatory hosts bear responsibility for ensuring that client firms have a proper business plan, that their activities remain within the scope of their permissions as appointed representatives, and for verifying that businesses continue to conduct their operations compliantly.
Reflecting on the Outcomes of the FCA Review of Effective Appointed Representative Oversight
FCA compliance is a fundamental requirement for every UK business that offers activities or services that fall under the FCA’s jurisdiction. The regulator published a review in 2023 that looked at good practice benchmarks and areas in need of improvement.
This report stated that good practices and services that regulatory hosting clients should look for include:
- Oversight of a broad range of information regarding the appointed representative
- The creation of action plans to address and resolve gaps in compliance
- Clear, documented procedures for client on and offboarding
- Proactive monitoring of the appointed representative’s activities
- Adequate controls and resources to carry out all the responsibilities of a regulatory host
However, the FCA also found several areas where best practice standards were not upheld throughout providers.
These included scenarios where hosting was reviewed with a tick-box approach, checks were performed automatically without human judgement, there was a lack of thorough understanding of the appointed representative’s business model, and an absence of action to address issues identified through ongoing monitoring.
Why Prospective Appointed Representatives Should Conduct Due Diligence Before Selecting a Principal Firm
The FCA has found that there have been, unfortunately, a greater number of complaints and supervisory cases linked to principals and appointed representatives than for directly authorised firms. This reinforces the role regulatory hosts play in helping client firms demonstrate full adherence and remain viable, competitive and sustainable businesses.
Complaints and supervisory cases should be avoidable with the right controls, checks, and communications, but they can cause considerable damage to the operations and credibility of both hosts and clients. This can have long-term ramifications for appointed representatives who may have been unaware of the underlying issues.
Regulatory hosts with the right expertise and knowledge will ensure that appointed representatives act within the scope of the permissions granted, individuals are fit and proper to perform regulated activities, and both onboarding and ongoing oversight meet every standard expected by the FCA.
Firms comparing regulatory hosting services are advised to take all the time needed to review the options and seek advice, only proceeding when they have a provider with a wealth of experience, bespoke technology, and robust processes.
Read more about Thornbridge Investment Management - Thornbridge Investment Management Launches New Cells Under Fundline PCC in Partnership with Resilience Asset Management
About Thornbridge Investment Management
We offer hosted fund management & regulatory hosting to appointed representatives. Based in the City of London, we provide outsourced solutions to investment firms and individuals under our regulatory umbrella. Our areas of focus are fund advisory, investment advisory and distribution. Thornbridge is authorised and regulated by the Financial Conduct Authority (FRN: 713859).
Media Contact:
Liv Ranson
Relationship Manager
+44 (0)203 972 4510
