On 11 August 2025, HM Treasury released a policy statement on the Appointed Representatives (AR) regime (AR regime), following a Call for Evidence published in December 2021. The AR regime allows unauthorised firms to act under an authorised firm's licence (known as the principal) enabling it to carry on certain regulated activities in the UK.
The principal firm is responsible for ensuring that its AR acts with appropriate competence and in compliance with relevant regulations. There are currently approximately 34,000 AR firms operating in UK markets under around 2,400 authorised firms. Whilst initially designed for small firms/sole traders operating in the insurance/advisory sector, over the years the regime has become used by asset managers particularly when setting up an office in the UK for the first time as this is generally a quicker way to enter the UK market than obtaining direct authorisation by the FCA.
Issues Identified in the Call for Evidence
Responses to the Call for Evidence highlighted the benefits of the AR regime, including facilitating competition, supporting innovation, and enabling new providers to enter the market. However, concerns were raised regarding instances of inadequate oversight by some principals, leading to misconduct and difficulties in seeking redress. A minority of principals were identified as failing to provide sufficient oversight, and there were cases where ARs engaged in regulated activities for which the principal had not accepted responsibility, leaving consumers without recourse to the Financial Ombudsman Service (FOS).
Some respondents expressed concern about extending principal responsibility for all AR activities, citing potential impacts on business models. No respondents supported giving the FCA direct regulatory powers over ARs, as this would undermine the principal's responsibility and the rationale for the AR regime.
Proposed Reforms
The UK Government has concluded that the broad scope of regulated activities that ARs may carry out should be maintained, in order to preserve the economic and competitive benefits of the regime. However, two regulatory gaps have been identified and will be addressed through targeted legislative reforms:
- Principal Permission Requirement: Authorised firms will be required to obtain specific permission from the FCA before appointing ARs. This reform is intended to ensure that only firms with appropriate expertise and resources are able to act as principals and oversee ARs effectively. The Government intends to amend section 39 of the Financial Services and Markets Act 2000 (FSMA 2000) so that the appointment of ARs will only provide an exemption from being directly authorised if the principal firm has received permission from the FCA to act as a principal. The FCA will have the power to vary or withdraw this permission as circumstances require.
The Government is working with the FCA to design the implementation of this reform to avoid disruption to existing business activity. In particular, existing principal firms will not be required to apply for new permission, and the permission process will be embedded within the new firm authorisation process rather than as a separate application. The Government will consult on the detailed design and implementation of this measure in due course.
- Extension of Financial Ombudsman Service Jurisdiction: Currently, the FOS's compulsory jurisdiction applies only to authorised firms. If a consumer complaint relates to an activity of an AR that falls outside the scope of the principal's accepted responsibility, the FOS cannot investigate the complaint. The Government will introduce a targeted extension of the FOS's jurisdiction to ensure that consumers have consistent access to redress.
Under the proposed reform, the FOS will be able to investigate complaints involving ARs directly where the principal is not responsible for the issue in dispute, and may direct redress measures to the AR itself. This extension will only apply in circumstances where the principal is not held responsible by the FOS for the actions of its AR.
The Government will work with the FCA and FOS to develop a detailed proposal for this extension, which will be consistent with the conclusions of the recent FOS review. A consultation on the proposal will follow.
Context and Next Steps
The Government's approach is to ensure that the AR regime continues to support competition, innovation, and economic growth, while providing proportionate consumer protection. The reforms are designed to be targeted and not to disrupt the operation of the 34,000 AR firms currently in the market. The FCA has already taken steps to strengthen oversight of ARs, including the introduction of new rules and guidance, enhanced scrutiny of principal firms, and improved data collection.
The Government will now work with the FCA and FOS to develop and consult on the detailed proposals for both the principal permission and the extension of FOS jurisdiction. The intention is to implement these reforms in a manner that preserves the benefits of the AR regime while addressing the identified regulatory gaps.
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