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What is the difference between a regulated and unregulated referral?
Category: Compliance
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.