It is the responsibility of a Principal firm to obtain and maintain continuous Professional Indemnity Insurance (PI) for the activities carried out by its current and former Appointed Representative’s (AR’s). There is nothing to prevent an AR from choosing to have their own policy, which they may find of benefit. However, an AR having its own cover would not satisfy the obligation on the Principal firm. Therefore, if you have or you are advising a firm with AR’s the PI cover must, under the FCA rules (MIPRU 3), be taken out by the Principal firm and cover its existing and former ARs.
The majority of Principal firms that hold PI extends to the activities of its ARs, however it is worth checking to ensure it extends to both existing and former ARs. This includes both Appointed Representatives and Introducer Appointed Representatives. Also, the cover should not have any exclusions or excesses that would unreasonably limit the level of indemnity.
The FCA do stipulate that Principal firms who do not hold the required compliant PI should get adequate cover as soon as possible. In addition, the firm would be required to submit a SUP 15 notification to the FCA confirming the breach.
