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HM Treasury (HMT) has launched a consultation on proposed reforms to the UK Appointed Representatives (AR) regime, building on its August 2025 policy statement.
The consultation reflects the Government's intention to preserve the regime's important role as a cost-effective route to market for financial services firms, while strengthening oversight and addressing perceived gaps in consumer protection.
HMT's proposals form part of the Government's wider regulatory reform agenda and are promoted aimed at supporting growth through transparent and proportionate regulation, that promotes competition and innovation in financial services. The proposals are intended to:
- reduce the risk of misconduct involving ARs;
- ensure consumers engaging with ARs have appropriate protection when problems arise; and
- align conduct and fitness and propriety (F&P) standards applicable to ARs more closely with those applying to authorised firms.
Key HMT proposals
1. A new "principal permission" gateway
HMT proposes introducing a regulatory gateway, requiring authorised firms to obtain a specific permission from the Financial Conduct Authority (FCA) before acting as a principal and appointing ARs.
This would involve amendments to the Financial Services and Markets Act 2000 (FSMA) to introduce a new permission regime for an authorised person acting as a principal. Firms without this permission would be prohibited from acting as a principal.
The proposal would enable the FCA to assess whether prospective principals have appropriate expertise, resources, governance arrangements and systems to oversee ARs effectively.
Importantly, HMT has indicated that transitional arrangements
are expected to apply to existing principals. These arrangements
would allow existing principals to maintain their existing AR
appointments (as well as appoint new ARs as necessary), although
the FCA would retain powers to vary or withdraw that grandfathered
permission if necessary to maintain appropriate standards of AR
oversight and consumer protection.
2. Extending the jurisdiction of the Financial Ombudsman Service (FOS)
HMT proposes extending the compulsory jurisdiction of the FOS to address what it considers to be a gap in consumer protection. Under the proposals, FOS would be able to consider complaints relating to regulated activities carried on by ARs where the principal firm cannot be held responsible for the AR's acts or omissions. In those circumstances, FOS would be able to determine complaints directly against the AR and, where appropriate, award redress against it.
HMT has emphasised, however, that this change is intended to operate as a measure of last resort and is not designed to reduce the responsibility of principals for oversight of their ARs. That said, this proposal has prompted certain questions, including:
- who bears responsibility for complaints handling processes where ARs are involved;
- whether principals should have additional obligations to notify ARs of complaints and ensure their cooperation with FOS; and
- potential implications for the Financial Services Compensation
Scheme (FSCS).
3. Bringing ARs within scope of the Senior Managers and Certification Regime (SM&CR)
HMT proposes bringing ARs within the scope of SM&CR, to align the conduct and F&P frameworks for ARs more closely with those applicable for FCA authorised firms.
Currently, the legacy Approved Persons Regime continues to apply to ARs. HMT considers that applying a single framework to both principals and ARs will ensure greater consistency of standards across the market while reinforcing individual accountability.
Under the proposals:
- the SM&CR conduct rules would apply directly to staff within ARs (excluding ancillary staff);
- principal firms would be required to apply F&P assessments to AR personnel; and
- the FCA may introduce a dedicated senior management function
relating to AR oversight within principal firms.
4. Repeal Tied Agent framework
HMT also proposes to repeal s39A FSMA, which relates to tied agents under the Markets in Financial Instruments Directive (MiFID), as it is considered redundant following Brexit.
Following the UK's exit from the European Union, the
provision has limited practical relevance. It now only applies in
circumstances where UK MiFID firms engage non-authorised UK persons
to carry on investment services business outside the UK. As such,
HMT considers that activities conducted overseas should instead
fall within the regulatory perimeter of the relevant jurisdiction
(and not the UK).
What happens next?
The consultation closes on 9 April 2026. Following consideration of feedback, the Government is expected to publish its response and set out a timetable for legislation and implementation. Further consultation by the FCA on detailed rules is also anticipated.
Key takeaways for firms
Although implementation may take time, both principal firms and ARs may wish to begin considering the potential impact of the proposals, including:
- whether governance, oversight frameworks and resources would withstand FCA scrutiny under a principal permission gateway;
- contractual arrangements with ARs, particularly in relation to complaints handling and cooperation obligations;
- potential exposure arising from direct FOS jurisdiction over ARs; and
- the operational implications of transitioning AR staff into the SM&CR framework, especially the application of conduct rules to AR staff.
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