The operating system for introducer-led growth

Compliance — Frequently Asked Questions

How does RQ support compliance?

RQ embeds compliance into every referral workflow, making it easy to meet regulatory requirements without creating extra administrative burden. **Commission and fee tracking:** - Audit trails for all income received for introductions (fees, commissions, software credits – anything) - Client consent capture for any third-party payments, as required by fiduciary duty - Fee transparency and disclosure management **Conflict and due diligence management:** - Documented procedures for identifying and managing conflicts of interest - Due diligence records on third-party professionals you refer to - Partner status tracking to ensure regulatory compliance **Firm-wide consistency:** - A consistent approach to making and recording referrals across the firm - Staff training records for referral processes and compliance obligations - Referral rationale recorded on client files **Regulatory support:** RQ was designed with input from ICAEW to support firms with DPB (Designated Professional Body) obligations. For firms conducting ERAs (exempt regulated activities), RQ provides ERA tracking and triage to identify which referrals require DPB oversight. For FCA-regulated firms, RQ provides the documentation needed to show that client introductions are handled appropriately, with proper disclosures and record-keeping. Records are retained for the required 6-year period, making your firm audit-ready at all times.

Can we evidence compliance to regulators?

Yes. Firms can clearly demonstrate who made a referral, when, with what consent, and what happened next.

Does RQ replace our compliance processes?

No. RQ supports existing compliance frameworks by enforcing them consistently.

Is consent captured automatically?

Yes, where required, consent is captured automatically through built-in steps and communications in the referral workflow.

Do I need to disclose referral fees to clients under ICAEW rules?

Yes, and this is one of the most commonly flagged issues in ICAEW monitoring reviews. Under the ICAEW Code of Ethics (Section 320), any member firm that receives a commission or referral fee for introducing a client to a third party must disclose this to the client before the referral is made. The disclosure must be specific — not buried in general terms of engagement. Your client needs to understand: who you are referring them to, that a financial arrangement exists between your firm and the receiving party, the nature of the fee (whether it is a fixed amount, a percentage of the product value, or an ongoing trail commission), and roughly how much the fee will be. Verbal disclosure alone is not sufficient. ICAEW expects firms to document the disclosure in writing and to obtain the client's informed consent, ideally with a signature or written acknowledgement. Firms that rely on blanket clauses in engagement letters often fall short during monitoring visits, because the disclosure needs to be specific to each referral arrangement. If your firm refers clients to financial advisers, mortgage brokers, or other regulated professionals and receives any form of payment for doing so, you must treat fee disclosure as a mandatory compliance step, not a nice-to-have.

What is the difference between a regulated and unregulated referral?

The distinction between a regulated and an unregulated referral matters enormously for compliance. An unregulated referral — sometimes called a simple introduction — is where you pass a client's name and contact details to another professional without recommending them, endorsing their services, or receiving any payment. You are simply connecting two parties. A regulated referral is different. It becomes regulated when one or more of the following applies: you recommend or endorse a specific firm or adviser, you receive a fee or commission for the introduction, or you provide advice alongside the referral that relates to a regulated activity (such as investment advice or insurance). Under the ICAEW Designated Professional Body (DPB) regime, accountancy firms that make regulated referrals must comply with the DPB Handbook requirements. This includes obtaining informed client consent, disclosing any fees, maintaining proper records, and conducting due diligence on the receiving firm. If your firm receives referral fees from an IFA, mortgage broker, or any regulated professional, the referral is almost certainly regulated — even if you think of it as a casual introduction. The key test is whether there is any commercial arrangement or endorsement involved. When in doubt, treat the referral as regulated. The compliance requirements are straightforward, and the consequences of getting it wrong during an ICAEW monitoring review can be significant.

Can I refer clients to a restricted financial adviser?

Yes, there is no rule preventing your firm from referring clients to a restricted financial adviser. However, you have a responsibility to make sure your client understands the distinction. A restricted financial adviser can only recommend products from a limited range of providers or product types. An independent financial adviser, by contrast, can recommend from the whole market. This matters because your client may assume that any adviser you refer them to will provide whole-of-market advice. If the adviser is restricted, your client could end up with a product that is not the best available option for their needs. Under the ICAEW Code of Ethics, you should act in your client's best interest. This means disclosing the adviser's regulatory status (which you can verify on the FCA Financial Services Register at register.fca.org.uk), explaining what 'restricted' means in practical terms, and letting the client make an informed decision. Many firms choose to include only independent financial advisers on their referral panels to avoid this complexity. Others include restricted advisers but ensure the distinction is clearly communicated. Either approach can work, provided the client is properly informed. If your firm does refer to restricted advisers, document the disclosure alongside your standard referral consent records. This protects both your firm and your client.

What records do I need to keep for ICAEW DPB compliance?

The ICAEW DPB Handbook requires firms to maintain comprehensive records of all referral activity that falls under the Designated Professional Body regime. At a minimum, you should keep records of: the referral itself (who was referred, to whom, when, and why), evidence of informed client consent (ideally signed or acknowledged in writing), the fee disclosure provided to the client (including the nature and approximate amount of any commission), any due diligence carried out on the receiving firm, and the outcome of the referral (whether the client proceeded, what product or service was taken up, and any fees received). These records should be kept for at least six years, which aligns with the standard retention period for professional records. Some firms keep them longer as a matter of good practice. During an ICAEW monitoring review, inspectors will typically ask to see a sample of referral files. They will check that consent was obtained before the referral was made, that fee disclosure was specific and timely, and that the firm can demonstrate an audit trail from initial referral through to outcome. Firms that track referrals informally — through emails, spreadsheets, or verbal agreements — often struggle during these reviews. A centralised system that captures consent, disclosure, and outcomes in one place makes it significantly easier to demonstrate compliance. The key principle is straightforward: if you cannot evidence it, you cannot prove you did it.

Do I need client consent before sharing their data with a referral partner?

Yes, on two grounds. First, under the ICAEW Code of Ethics and the DPB Handbook, firms must obtain informed client consent before making a regulated referral. The client must understand who their information is being shared with, the purpose of the referral, and any commercial arrangement between your firm and the receiving party. Second, under UK GDPR and the Data Protection Act 2018, sharing personal data with a third party requires a lawful basis. For referrals, the most appropriate basis is usually consent — particularly where the data sharing is not strictly necessary for the service the client originally engaged you for. Consent must be freely given, specific, informed, and unambiguous. A blanket clause in your engagement letter saying 'we may share your data with third parties' is unlikely to meet either the ICAEW or data protection standard. Best practice is to obtain case-by-case consent at the point of referral, explaining who you are referring them to, why, and what data will be shared. This can be captured in a brief consent form, an email exchange, or through a digital workflow. The important thing is that you can evidence the consent was obtained before the data was shared, not after. Firms using tools like RQ can automate this step, capturing consent digitally and storing it alongside the referral record for audit purposes.

What happens during an ICAEW DPB monitoring review?

An ICAEW DPB monitoring review is a routine inspection carried out by ICAEW's Professional Standards department. Its purpose is to check that your firm's investment business activity — including referrals to financial advisers — complies with the DPB Handbook and the ICAEW Code of Ethics. The review typically involves a visit to your firm (or a remote review) where an inspector will examine a sample of client files involving referral activity. They will look for evidence of informed client consent, proper fee disclosure, due diligence on receiving firms, record-keeping, and appropriate oversight within the firm. The inspector may also review your firm's referral policies and procedures, your panel of referral partners, and your systems for tracking referral outcomes. They will ask questions about how referrals are initiated, who approves them, and how fees are recorded and disclosed. Common issues found during reviews include: fees not disclosed to clients, consent obtained after the referral rather than before, no written records of referral activity, inadequate due diligence on partner firms, and blanket consent used where case-by-case consent is required. If issues are found, the inspector will make recommendations. In serious cases, this can lead to conditions being placed on your DPB licence, additional monitoring visits, or referral to ICAEW's Investigation Committee. The best preparation is to ensure your referral processes are documented, your records are complete, and you can demonstrate compliance for every referral in the sample period.

Are referral commissions taxable for accountancy firms?

Yes. Referral commissions and introducer fees received by your firm are taxable income and must be declared in your firm's accounts. This applies regardless of whether the fee is a one-off payment or an ongoing trail commission. For partnerships and LLPs, the income forms part of the firm's trading profits and is allocated to partners in the usual way. For limited companies, it is included in the company's corporation tax return. VAT treatment depends on the nature of the service. A simple introduction — where you pass on a client's details without providing advice — is generally an exempt supply for VAT purposes, as it falls within the exemption for financial intermediation services. However, if the introduction includes an element of advice, or if you are acting as an appointed representative of the receiving firm, the VAT position may differ. HMRC's guidance on this area can be complex, and the treatment may vary depending on the specific arrangement. It is worth taking advice on the VAT position of your referral fees, particularly if the amounts are significant. From a compliance perspective, ICAEW expects member firms to account for referral income properly. Failure to declare referral fees could create issues not only with HMRC but also during ICAEW monitoring reviews, where inspectors may ask to see how fees are recorded and reported. The practical advice is straightforward: treat referral fees as any other income, declare them, and keep clear records of amounts received, from whom, and in relation to which client referrals.

What are the SRA rules on referral fees for solicitors?

Solicitors in England and Wales are regulated by the Solicitors Regulation Authority (SRA), and the rules on referral fees are set out in the SRA Standards and Regulations. The key provisions are found in the SRA Code of Conduct for Solicitors (paragraphs 5.1 and 5.2) and the SRA Code of Conduct for Firms (paragraph 5.1). These require that any financial arrangement connected to a referral must be disclosed to the client, must not compromise the solicitor's duty to act in the client's best interest, and must not influence the advice given. There is an important distinction in personal injury work. The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) banned referral fees in personal injury cases. Paying or receiving a referral fee in connection with a personal injury claim is a regulatory offence. Outside personal injury, referral fees are permitted but must be handled transparently. The SRA expects firms to tell the client about the arrangement, confirm that the referral is in the client's best interest (not driven by the fee), and keep records of the arrangement. This includes disclosing the fee to the client in writing. For law firms that receive referrals from accountants, IFAs, or estate agents, the obligation sits with both the referring and receiving firm. If your firm refers clients to a solicitor and receives a fee, both parties should ensure the arrangement complies with SRA and (where applicable) ICAEW requirements. Dual-regulated referrals require attention to both sets of rules.