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Glossary

Annual AR review

At least once every 12 months the principal must specifically review each AR, though not its IARs. The review covers the AR's solvency and suitability, the fitness and propriety of its senior people, and whether the principal's own controls and resources for overseeing it are still adequate. Each review must be recorded and kept for six years.

What it covers

  • Solvency and suitability; the fitness and propriety of controllers, directors, partners, proprietors and managers; and the adequacy of the principal's controls and resources (SUP 12.6A.2R).
  • The AR's financial position should be assessed at least annually by someone with suitable experience (SUP 12.6.2G and SUP 12 Annex 1).
  • It may focus on what changed since the last review, must be carried out by people with appropriate knowledge, and significant issues are escalated to the governing body (SUP 12.6A.5G).
  • A written record is kept for at least six years (SUP 12.6A.4R).

What the FCA found

  • In its September 2024 review, 82% of principals assessed in depth had completed annual reviews, but only 43% were of good quality.
  • The failings were tick-box reviews, reliance on website checks or AR self-declarations, poor audit trails and no escalation.

Common misconceptions

“A signed self-declaration from the AR is the review.”
The FCA calls reliance on self-declarations a weakness. The principal must verify what it is told (SUP 12.4.4EG).
“The annual review and the self-assessment are the same exercise.”
The review is per AR. The self-assessment is one firm-level document approved by the governing body.

In Merrin

Merrin prepares each annual review over a frozen snapshot of the firm and its people, and records who approved it and when.

Reviews & approvals

Sources

Checked against these sources on . This is general information, not legal advice.

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