Proposed reforms to the UK’s Appointed Representatives Regime

read time: 6 mins

06.03.26

Oliver Woodhouse

The UK’s Appointed Representatives (AR) Regime has played a critical role in our financial services ecosystem for decades, enabling firms to operate under the ‘regulatory umbrella’ of a Financial Conduct Authority (FCA) authorised principal firm.

The AR regime is recognised as supporting innovation, offering a route to market vs securing FCA authorisation direct and providing commercial flexibility for a range of sectors – from fintech innovators, to embedded finance and insurance solutions, investment intermediaries and advisors and firms in the consumer credit space.

This article outlines HM Treasury’s proposed updates to the UK’s Appointed Representatives Regime and what they mean for firms. It highlights the key areas of reform and the practical steps principals and appointed representatives (ARs) should start considering now.

Change ahead?

HM Treasury’s AR regime consultation, published in February 2026, focuses on reform which preserves the benefits of the existing AR regime whilst carefully addressing concerns linked to consumer protection, effective appointed representative oversight and overall accountability of principals and ARs.

So, the consultation isn’t a fundamental redesign of the AR model itself, rather a refresh to enhance key elements and raise expectations – firms using AR structures and principals providing AR services ought to take note of the changes.

The AR regime today

Mechanics of the AR regime where principal firms accept regulatory responsibilities for their ARs is not new. However the consultation comes after years of development and regulatory scrutiny, for example the FCA’s report on improving the AR regime in Q4 2023, which highlighted pace of AR growth and core challenges with certain types of ARs, insurance coverage and capital confusion and principals lacking dedicated resource to oversee their ARs.

The consultation should be read in this context, of reinforcing responsibilities and focusing on improvement, not redefining what an AR is and how it operates.

What does the consultation focus on?

HM Treasury’s consultation is quite targeted, with key themes including:

A formal permission for firms to act as principal	The most significant proposal, this would create a requirement for authorised firms to obtain FCA permission to act as a principal, before doing so. It creates a new regulatory gateway for the FCA to assess a firm is capable, with required resources and governance to supervise ARs effectively. Helpfully, existing principal firms would initially be deemed to hold this permission, but the FCA would have powers to vary or withdraw this if concerns arise. There’s also scope for limitations, for example: rights to appoint introducer AR only. Why does this matter? Acting as a principal becomes a specific element of a firm’s regulatory status, not an ancillary aspect.
ARs and Senior Managers and Certification Regime	It’s also proposed that ARs will be brought within the Senior Managers and Certification Regime to replace the existing ‘approved person’ framework that currently applies. This would align conduct and fitness and propriety frameworks for ARs with the Senior Managers and Certification Regime frameworks that apply to the principal authorised firm. Why does this matter? This focuses on greater consistency and clearer lines of responsibility with ARs and principals, it may lead to new senior management functions and prescribed responsibilities related to principal oversight. Relevant AR staff would also be subject to Senior Managers and Certification Regime conduct rules and fit and proper requirements.
Tied Agent tidy up	Legacy provisions related to tied agents would be repealed. A tied agent is a party acting under responsibility of a Markets in Financial Instruments Directive authorised investment firm. Why does this matter? A tied agent would need to meet existing legal and regulatory AR conditions any way. Therefore, following Brexit, separate arrangements for tied agents no longer seems necessary.
Wider FOS reach	Currently the UK’s Financial Ombudsman Service (FOS) has jurisdiction over principal firms for ARs, generally covering acts or omissions related to things an AR does as part of business that a principal accepts responsibility for (or anything else the principal is responsible for) so eligible complainants don’t have FOS recourse if an AR’s conduct is out of scope or responsibility can’t be established. It’s therefore proposed that FOS would still investigate an AR’s principal at first, however if FOS determines a principal is not responsible for the ARs act or omissions, FOS can consider the complaint against the AR and direct redress measures that way. Why does this matter? The goal is clear, all consumers should have access to FOS, whether dealing with an principal authorised firm or an AR. This may lead to further changes, such as obligations on principal firms to ensure ARs are aware of complaints and cooperate with FOS.
Updating legislation and rules	It’s also proposed that detailing requirements within FCA rules would provide a more coherent and user-friendly regime, for example: in terms of requirements for AR and principal contractual relationships, approach for AR inclusion on the financial service register, and other targeted AR and principal requirements. Why does this matter? It would give the FCA greater flexibility to tailor requirements, for example: linked to types of regulated activities ARs carry on, and aim to collate requirements in a more orderly way for firms.

What should firms be considering?

The consultation closes on 9 April 2026 so firms should act if they wish to engage with any of its feedback questions. HM Treasury would then consider responses and move towards implementation.

The direction of travel seems clear, an enhanced AR regime for all, so there’s clearly some practical considerations that firms can start to thing about now; for example:

Increased principal expectations: the new permission and gateway reinforces a key regulatory message – acting as principal is not an ancillary activity, you must demonstrate, on an ongoing basis, that you have effective governance, controls and resourcing in place to manage AR relationships and oversight. Firms should consider, are existing oversight models sustainable now and for future growth?
Operational risk: the suggestion that the FCA could withdraw or restrict principal permissions could have significant and speedy consequences to a firm, firms with large AR networks, operating platform style models, or working with ARs that present oversight challenges, should consider how resilient structures are to regulatory intervention and stress test models.
AR knowledge and upskilling: with ARs likely to enter the FOS and Senior Managers and Certification Regime remit, it’s clear that key staff and personnel involved in relevant activities to which the AR status relates, will need additional training and upskilling to understand responsibilities and obligations.
Change management: the consultation and AR regime proposals do not exist in isolation, the UK is in a constant state of regulatory change that requires close monitoring and an effective change management strategy to ensure principals and ARs remain compliant.

Next steps for firms

The UK’s appointed representative regime is critical for so many firms, it’s something Ashfords regularly advise on – both ARs and principals – in developing new products and services, entering different financial markets and sectors, and helping overseas firms launch. HM Treasury’s consultation is a good reminder for firms to review AR oversight arrangements and network risk, assess individual accountability and experience, and consider state of existing contracts between ARs and principals.

For further information, please contact our fintech and financial services regulatory teams.