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Glossary

AR agreement

Every AR must have a written contract with its principal. The contract is what makes the AR exempt: it sets out the business the AR may do, records the principal's acceptance of responsibility, and must contain the terms the Treasury's regulations and SUP 12.5 require.

Required terms

  • Require the AR, and anyone providing services to it, to comply with the relevant requirements in or under FSMA (SUP 12.5.5R(2)).
  • Where other principals are allowed, require the AR to tell the principal about any proposed appointment by another principal, changes to that business and its termination (SUP 12.5.5R(3)).
  • Allow the principal to terminate if it can no longer adequately oversee the AR. Termination should not be automatic (SUP 12.5.5R(4), SUP 12.5.4G).
  • For IARs, limit the scope to introductions and non-real-time promotions (SUP 12.5.7R).

Should also include

  • Terms that keep the AR within the principal's permission, co-operation with the FCA and access to premises, auditor rights, and the information the principal needs, including anything that could trigger a review (SUP 12.5.3G).
  • Escalation and MI expectations, where appropriate (SUP 12.4.4GG).
  • The principal keeps the original and every amendment (SUP 12.9.1R), and must have systems to enforce the contract (SUP 12.6.11AR).

Common misconceptions

“Contracts signed before 2022 are fine as they are.”
The termination term had to be added at the first renewal or revision after 8 December 2022.
“The contract only needs to list the activities.”
The FCA's April 2026 review criticised AR agreements that did not clearly accept responsibility or include the required terms.

In Merrin

Merrin drafts the agreement from the principal's template and sends it for signing, or stores a copy signed elsewhere, against the firm's record.

AR onboarding

Sources

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

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