Regulatory Updates

On February 13, 2026, HM Treasury published a consultation paper outlining proposals to tighten the Appointed Representative (“AR”) Regime, introducing reforms across oversight, accountability and complaints handling. These measures target strengthened governance standards and more robust consumer protection within the UK financial services sector.

Rationale for Reform

The AR Regime has come under increased scrutiny, with approximately 34,000 ARs operating across a broad range of regulated activities. This scale, alongside those ARs engaged with eligible complainants producing up to four times the number of complaints as compared to directly authorized firms¹, highlights an area in need of redress. However, HM Treasury has also emphasized the regime’s overwhelmingly positive impact on UK financial services and its important role in the wider ecosystem. Balancing these benefits with emerging risks, HM Treasury identified key regulatory gaps and set out two central reforms²:

• A dedicated route for Principal Firms to obtain specific permission before appointing ARs
• An expansion of the Financial Ombudsman Service’s (“FOS”) jurisdiction to cover AR activity

This targets legislative reform to prevent misconduct involving ARs whilst providing appropriate consumer protection when things go wrong.

Core Proposals Outlined in the Consultation Paper

• Principal Permission Requirement: This introduces an FCA ‘principal permission’ gateway requiring firms to obtain approval before acting as Principals, with existing Principals grandfathered in but with their continued eligibility deemed subject to ongoing FCA review.
• Expanded FOS Jurisdiction: Under the proposal, the FOS could consider complaints directly against ARs where Principals are determined to not be responsible, creating an alternative redress route directly against the AR while maintaining Principals as primary complaint handlers.
• ARs Included Within SM&CR Scope: Introducing clearer conduct and accountability standards, the proposal would align ARs with SM&CR by applying Conduct Rules to AR staff. This will require principals to certify them as fit and proper, and empowering the FCA to introduce a dedicated Senior Management Function at the Principal firm to strengthen AR oversight while simplifying the regulatory landscape.
• Repeal of s.39A FSMA 2000 Tied Agent Permission: Following “Brexit”, and with the relevant provisions now incorporated into UK law, the tied agent framework is no longer considered fit for purpose, as UK regulation of overseas based activity is no longer required. All comparable parties should instead transition into the AR model, operating under full Principal oversight.

Expected Impact on Principal Firms and ARs

These proposals aim to raise collective standards rather than restrict the regime and will undoubtedly have a positive impact across all stakeholders, contributing to greater professionalism, more robust oversight frameworks and reduced ambiguity regarding responsibility. Principal Firms with extensive AR networks are likely to experience the most operational impact, while ARs and individuals seeking AR status should anticipate deeper scrutiny, enhanced due diligence and a clearer expectation that permissions be exercised with the same discipline and consumer focus applied by directly authorized firms. Those performing functions on behalf of ARs under SM&CR will also come under more structured conduct and accountability requirements.

These developments will bring notable changes to the landscape but Principal Firms and ARs with well established governance, monitoring and oversight arrangements should experience minimal disruption. For such firms, the reforms provide greater clarity around expectations and reinforce the legitimacy and sustainability of the AR model, helping to preserve the core integrity of the regime while promoting more transparent and consistent practice across the industry.

Next Steps and How We Can Assist

If you are considering becoming an AR, exploring the implications of these reforms, or would like to discuss how the evolving AR framework may affect your business model, we would be very happy to speak with you. Please do not hesitate to reach out should you wish to discuss these developments in more depth and provide support in navigating regulatory reform.

The full consultation paper can be accessed here.

Sources:
¹ FCA PS22/11: “Improving the Appointed Representative Regime”, 2022.
² HM Treasury Policy Statement: “The Appointed Representatives Regime”, August 2025.