Weight Adjustment of AR License for Reference of WikiFX Rating

The Forex market has recently witnessed a proliferation of both AR license and investors’ complaints against AR licensees. As the AR license isn’t essentially a regulatory license, WikiFX is reassessing AR license’s reference value for investors and makes the following announcement about weight adjustment of AR license for new reference of WikiFX rating: 

About AR license:

The Financial Conduct Authority (FCA) in UK defines AR, or appointed representative, as any firm or individual authorized by an FCA licensee(AR principal broker) to act as its agent, but not directly regulated by FCA.

As Australia’s regulatory framework resembles that of UK to a large extent, ASIC(Australia) also offers a similar interpretation of AR as an authorized agent for AFSL licensee.

Many emerging Forex brokers in China prefer to be an AR licensee by cooperating with MM licensee because they can’t afford the high cost of obtaining an MM license.

AR must have a written contract with the AR principal broker, who is fully responsible for the compliance of AR including the products and services, consultation and impartiality towards customers. So the principal broker also has investigation to ensure a firm or individual is fully qualified as an AR in terms of capital and competence. 

1. AR in the UK
Generally individual can become AR without FCA’s authorization. While, company that wants to become AR may need an authorization depending on whether it operates independently with its own business, how it handles the trade of customers and how many authorities it has obtained from the principal.

There are roughly 2 types of AR. Introducer appointed representative(IAR), as the name suggests, introduces the customers to the principal broker. The other type of AR operates individually under its own brand, and needs the authorization from FCA, namely an FCA AR license.

Since the principal broker is responsible for all activities of the AR, whose customer is subject to compliance review of the principal broker when opening an account, while customer’s orders are also usually handled by the principal broker. And as long as the principal broker is under FCA(UK)’s regulation, the customer of its AR is also protected by FCA and the Financial Service Compensation Scheme(FSCS).

2. AR in Australia

AR under ASIC(Australia)’s regulation can be individual, firm or collaboration partner and trustee. Trust funds cannot be AR, but the trustee may get an AR license. In addition, AFSL licensee under ASIC regulation cannot be AR for another company.

Sub-authorization system: Under the ASIC system, AR also authorizes its internal director and employee in order to provide financial services. This authorization, known as sub-authorization, requires the consent of the AFSL licensees, and the AR that performs the "sub-authorization" is called the "authorizer”.

One can obtain an AR license from two or more AFSL licensees, but must disclose other principal brokers to these AFSL licensees and obtain their mutual consent.

ASIC also provides that the AR license immediately becomes invalid once the AFSL licensee or the “authorizer” gives AR a written notice to terminate its service.