Reforms to the UK Appointed Representative Regime

Introduction

On 12 February 2026, the HM Treasury of the UK Government (“HMT”) issued a consultation paper setting out further detail on its proposals to strengthen confidence in the United Kingdom’s Appointed Representatives (“AR”) regime. An AR is a firm or individual that carries out regulated activities under the responsibility of an authorised financial services firm, referred to as the “principal”.

The AR regime plays an important role in the provision of financial services. It provides a proportionate and cost-effective path for firms to engage in regulated activity without being authorised, allows a broader range of providers to enter the marketplace, and supports competition, innovation and economic growth.

Since the regime began in 1986, the use of ARs has increased and spread across much of the financial services sector. There are now around 34,000 ARs operating under around 2,400 authorised firms.

HMT objectives

The HMT proposals are focussed on:

• Prevention of misconduct involving ARs;
• Improvement of consumer protection; and
• Alignment of conduct and fitness and propriety frameworks applicable to ARs and principals/authorised firms.

Proposal 1: Regulatory gateway to act as principal

Current: Any authorised firm may appoint an AR, with no specific mechanism in place to ensure the authorised firm is well-suited to do so.

Proposed: HMT proposes a new FCA permission regime for the activity of an authorised firm acting as principal. This:

• Will provide the FCA with a specific mechanism to scrutinise prospective principals and ensure they are suitable and have the necessary expertise, resources and systems in place to provide effective oversight of ARs;
• May include specific terms or restrictions that the FCA considers appropriate; and
• Will give the FCA the ability to vary or cancel a permission on its own initiative.

The new permission regulation will be applicable only for principals in respect of new ARs. Existing principals will be deemed to have permission from the FCA and will be able to maintain their existing AR appointments, as well as appoint new ARs as necessary. However, the FCA will have the ability to vary or withdraw such permission in the future if that proves necessary to maintain high standards of AR oversight and to protect consumers from harm.

Proposal 2: Requirements for an AR

Current: Section 39 of the Financial Services and Markets Act 2000 (“FSMA”) (which sets out the exemption from the general prohibition for ARs) requires the existence of a contract between the principal and its AR and for certain detailed requirements (including the principal’s written acceptance of responsibility for the AR’s activities).

Proposed: HMT proposes to replace these detailed contractual requirements with FCA rules. Doing so will give the FCA greater flexibility to tailor the requirements needed, for example, according to the nature of the regulated activities carried out by ARs.

Proposal 3: Tied agents

Current: Section 39A was inserted into FSMA in 2007 to ensure that the United Kingdom fully transposed the requirements in the first MiFID (2004/39/EU) for firms appointing tied agents undertaking business outside of the United Kingdom in another EEA Member State.

Proposed: HMT proposes to repeal Section 39A as no longer serving any purpose, considering that the United Kingdom is no longer part of the European Union.

Proposal 4: Extension of Financial Ombudsman Service

Current: Under section 39(3) of FSMA, a principal is responsible for anything done or omitted by the AR in carrying on the business for which the principal has accepted responsibility. The consequence is that the Financial Ombudsman Service (“FOS”) must decline to consider a complaint to the extent that the principal firm is not responsible for the underlying issue.

Proposed: Although HMT recognises that the principal will be responsible in the “vast majority” of cases, in its view it is unfair to leave consumers without access to the FOS in that small minority of cases where it is not. To achieve this, HMT proposes that:

• Where the FOS determines that a principal cannot be held responsible for its AR’s acts or omissions, the FOS will be able to directly consider the complaint against the AR itself. If the FOS upholds a complaint against such an AR, the FOS will then be able to direct any appropriate redress measures to the AR; and
• In support of this, the FCA (with FOS approval) will issue scheme rules to ensure that, in such a case, an AR is joined as a party to the FOS complaint allowing the AR (a) access to any relevant provisional or final determination made by the FOS and (b) the opportunity to make its own representations to the FOS.

Proposal 5: Extension of Senior Managers and Certification Regime

Current: The principal firm is responsible for making sure AR staff are fit and proper, and that they uphold high standards of conduct.

Proposed: HMT considers that it would be advantageous for principals and their ARs to operate under the same conduct, fitness and propriety and accountability frameworks and proposes to bring AR within scope of the Senior Managers and Certification Regime, as follows:

• The SM&CR general conduct rules would be applied directly to ARs. Hence, the same rules will apply to all individuals in an AR (except ancillary staff), or individuals who are themselves ARs;
• The FCA would require principal firms to apply fit and proper requirements, as judged necessary by the FCA, to their ARs. This should result in a considerable reduction of the c.38,000 persons within ARs that currently need FCA approval; and
• A new dedicated AR Senior Management Function (SMF) would be created and implemented for principal firms.

The consultation will close on 9 April 2026.