In line with the approach in the UK government’s March 2025 Regulation Action Plan, it has published a consultation setting out detailed proposals for the reform of the UK regime on appointed representatives (ARs). The proposed changes include:
- requiring authorised firms to have permission from the FCA before they can appoint ARs;
- extending the jurisdiction of the Financial Ombudsman Service (FOS) to apply directly to ARs in certain circumstances; and
- bringing ARs within the scope of the Senior Managers & Certification Regime.
These changes, if implemented, will have a significant impact on both ARs and their principals.
An appointed representative (AR) is a person who is not authorised by the FCA but is allowed to carry on certain regulated activities because a person who is authorised by the FCA (the AR’s “principal”) has agreed to take responsibility to the regulators for the actions of the AR.
In August 2025, we reported on a policy statement issued by the UK government with proposals for reforms in relation to ARs.
The government has now published a Consultation setting out the changes that it proposes to make. The main proposals are consistent with the direction of travel that was outlined in its earlier policy statement – as well as the overall regulatory approach in its March 2025 Regulation Action Plan - but there are new proposals as well.
The main changes that HMT is proposing are as follows:
- Permission needed to act as principal
As trailed in the earlier policy statement, HMT is proposing a regulated firm will need to obtain the FCA’s permission before it can act as principal under an AR arrangement. This will give the FCA the opportunity to determine whether the principal firm is itself suitable to act as principal.
This will not be a permission in the same sense as the permissions which set out which regulated activities an authorised firm can and cannot do. Instead, the regime will be modelled on section 55NA of the Financial Services and Markets Act 2000, which is a provision that was introduced specifically to require authorised persons to seek FCA permission before being allowed to sign off financial promotions for non-authorised persons. A similar provision will be introduced in relation to the ability to act as principal to ARs.
It is proposed that authorised firms who already act as principals to ARs will be deemed to have the new permission and will not need to apply for it. However, once they have the permission, they will become subject to the FCA’s ability to vary or withdraw the permission. HMT also proposes that some existing principal firms might have their permission limited to cover “introducer ARs” only (that is, ARs whose scope of appointment is limited to making introductions only and cannot undertake certain other activities, such as advising on investments).
- Extension of FOS jurisdiction to ARs
The Financial Ombudsman Service (FOS) provides a complaints resolution mechanism for consumers in respect of authorised persons. Where a consumer has a complaint about an AR, it can complain to the FOS and the FOS will normally take any appropriate action against the principal (who is responsible for the actions of the AR in respect of any business for which the principal has accepted responsibility).
However, the government has identified a potential gap in the regime, in that there can be situations where an AR’s conduct relates to matters that the principal has not accepted responsibility for – and, as the AR regime currently applies, the principal would not be liable for that conduct (although, as we reported previously, recent case law has cast doubt on that).
The government’s proposal is that the FOS will be able to consider any complaint involving regulated activities carried on by an AR. In most cases, the principal will be responsible and the FOS will direct any appropriate redress measures to the principal firm. But in cases where the FOS determines that the principal is not responsible, 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 the FOS would be able to make the same sort of awards and/or directions in respect of the AR that it could make against an authorised firm.
The government also says that any changes to the FOS regime will be designed and implemented to be consistent with the conclusions of the wider FOS review that it is undertaking.
The government does not propose that there be any changes to the FCA rules that apply to initial complaints handling (e.g. to extend the ability for the FCA rules to apply to ARs). The consultation says, however, that the FCA will consider (i) whether to make changes to the complaints handling rules (in DISP 1) to ensure that, where a complaint relates to an AR, the principal will make the AR aware of the complaint; and (ii) whether to place an obligation on the principal to ensure that its AR cooperates with the FOS.
In addition, HMT does not propose to make any changes to the Financial Services Compensation Scheme (FSCS) framework. The FSCS already covers the situation where an AR has acted outside the scope of activities agreed with its principal. Although the proposed extension of the FOS jurisdiction may result in additional claims to the FSCS, HMT does not think the impact will be material enough to require a change to the existing framework.
The government emphasises that the targeted extension of FOS’ compulsory jurisdiction would be a ‘measure of last resort’ (i.e. the exception rather than the rule), which in no way should be seen as reducing principal firms’ control and oversight duties.
- Bringing ARs within scope of the Senior Managers and Certification Regime
The position of staff within authorised firms is governed by the Senior Managers and Certification Regime (SM&CR). The position of staff within ARs, however, is governed by the approved persons regime – the regime which applied to authorised persons before the SM&CR was introduced. The approach for ARs is a historic hangover. The government now recognises that this is an anomaly and proposes to bring ARs within scope of the reformed SM&CR.
The government proposes that the three core elements of the SM&CR will be applied as follows:
- General conduct rules to apply to ARs: The SM&CR general conduct rules will be applied directly to ARs so that the rules will apply to all individuals in an AR (except ancillary staff), or individuals who are themselves ARs. This will mean that relevant individuals in principal firms and in their ARs will be required to meet the same general conduct standards.
- Requiring principals to apply fit & proper requirements: It is proposed that the FCA will use its existing rule-making power to require principal firms to apply fit & proper requirements, as judged necessary by the FCA, to their ARs. The Consultation says this would lead to a considerable reduction of the c.38,000 persons within ARs that currently need FCA approval under the approved persons regime.
- New SMF for principals: The FCA will have the ability to create a new dedicated AR Senior Management Function (SMF) in principal firms. This would reflect the responsibility that principal firms take on when appointing ARs, with senior management functions within principal firms held to account for overseeing the principal’s ARs.
- Repeal of the tied agent regime
The UK still has a concept of “tied agents” as a legacy of EU law. Historically, the concept of the tied agent overlapped substantially with the AR regime. There are only a few tied agents still in existence, and they no longer have the rights they once had to do business in the EU. The government considers that a tied agent regime is no longer needed, and it proposes to repeal the relevant provisions.
- Moving some requirements from legislation into the FCA rules
The current legislation relating to ARs contains detailed requirements relating to the contractual relationship between principals and their ARs: for example, part of the statutory definition of an AR includes that there is a contract in place which specifies which activities the AR is appointed to undertake.
The government is proposing that these provisions should be taken out of legislation and moved into the FCA rules. HMT intends to amend the existing legislation to allow for this. Once these matters become the responsibility of the FCA, it is likely that – in keeping with the general direction of travel for many areas of UK financial services regulation as part of the government’s growth and competitiveness agenda - the FCA will have greater flexibility to amend the requirements for someone to be an AR.
The consultation closes on 9 April 2026. There is no indication of when the proposed changes would come into effect. As some of them require legislative change, the timing is likely to be affected by the availability of parliamentary time.
In this latest set of proposals, the government continues to emphasise that the proposed changes would in no way reduce principals’ control and oversight responsibilities. In fact, it looks like those responsibilities would only intensify – for example, through the proposed new regulatory gateway for principal firms and the proposal to bring ARs within the scope of the reformed SM&CR. The proposal to move the detailed requirements on the principal/AR contractual relationship into FCA rules also means there’s greater potential for more frequent review and amendment of AR requirements in the future.
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