Ten firms have been placed under restriction by the UK's Financial Conduct Authority (FCA) for failing to meet the regulator's expectations on overseeing appointed representatives (ARs).
ARs are managed by authorised firms, known as principals, which are responsible for ensuring their ARs comply with FCA rules, rather than being directly authorised by the FCA.
Since the introduction of tougher rules to regulate principals in 2023, ten firms have been placed under restriction over the last six months.
The regulator said it had written to more than 3,000 principals about their obligations to properly oversee the behaviour and conduct of their ARs, while collecting data on every AR.
Additionally, the FCA created a new supervision department with more than 30 staff early last year to "raise the standard of oversight by principal firms of their appointed representatives".
Principals and the ARs they oversee account for over half the total value of recent claims to the Financial Services Compensation Scheme, generating up to four times more supervisory cases and complaints than other directly authorised firms, the FCA said.
FCA appointed representative department head Toby Hall said: "We made changes because we could see a real issue with the way appointed representatives were being overseen by their principals.
"Consumers are at risk of being misled and mis-sold, with a disproportionate number of claims relating to appointed representatives being made to the ombudsman and FSCS.
"With a new department in place, and more data collected on how appointed representatives are behaving, firms should expect to continue to hear from us as we work to raise standards."
