In February 2026, HM Treasury released a consultation proposing significant reforms to the UK’s Appointed Representatives (AR) regime, a framework currently used by around 34,000 ARs operating under approximately 2,400 authorised principal firms.

Although these reforms are not yet in force, the consultation signals the clearest regulatory direction of travel since the Financial Services and Markets Act 2000.

For governance, risk and compliance (GRC) professionals, the proposed changes represent a meaningful tightening of expectations around AR oversight, principal accountability and consumer protection. Firms using the AR model — or considering becoming principals — should treat these proposals as an early warning of future regulatory uplift and prepare proactively.

Why the AR Regime Is Being Reformed

The AR model offers a long‑established mechanism that balances market access with regulatory oversight. ARs are permitted to conduct regulated activities without direct FCA authorisation, with authorised principals assuming responsibility for their conduct.

However, FCA supervisory work in recent years has highlighted persistent risks, including:

• Weak oversight arrangements within some principal firms
• Consumer harm linked to poorly supervised ARs
• Blurred responsibilities and governance gaps
• Instances of ARs operating outside the scope of their appointment

HM Treasury’s 2026 consultation therefore seeks to strengthen consumer protection, improve the quality and consistency of principal oversight, align ARs more closely with broader financial services regulatory frameworks, and preserve the competitive and innovative benefits of the AR regime.

1. New FCA Gateway Permission for Principals

A central feature of the consultation is the introduction of a specific FCA permission for firms wishing to act as principals to ARs.

Current position: Any authorised firm can appoint ARs if it meets the statutory conditions. There is no dedicated FCA approval process assessing whether the firm is suitably equipped to oversee ARs before doing so.

Proposed change: Firms would need to demonstrate appropriate systems and controls, robust governance, sufficient resources, and effective monitoring capabilities. The FCA would gain authority to refuse, vary or withdraw permission.

Transition: Existing principals may initially be deemed to hold the permission, but this does not prevent FCA intervention.

2. Expansion of Financial Ombudsman Service (FOS) Jurisdiction

The consultation proposes extending the FOS compulsory jurisdiction so that consumers can have complaints heard directly against an AR when the principal is not responsible.

Currently, if an AR acts outside its appointment scope, FOS may be unable to investigate. Under the proposed model, the principal remains the primary respondent, but FOS can assess the AR directly where appropriate.

DISP rules would continue to apply to principals, not ARs.

3. Bringing ARs Within Scope of the SM&CR

A major proposal is to bring ARs within the Senior Managers and Certification Regime (SM&CR). Changes include applying Conduct Rules directly to AR staff, requiring fit and proper assessments, and introducing a new Senior Management Function responsible for AR oversight.

4. Additional Legislative Amendments

• Repeal of Section 39A FSMA (Tied Agents)
• Moving AR contract and register requirements into FCA rules for greater flexibility

How We Can Help

The proposed reforms to the Appointed Representatives regime are extensive, and while the final rules are still emerging, the expectations for principal firms are already rising. Preparing early will put your organisation in a stronger, more resilient position when changes take effect.

Our team can support you at every stage, including:

• Principal readiness assessments to benchmark your current oversight framework against expected FCA requirements
• Enhancement of governance, MI and supervision controls tailored to AR models
• Review and redesign of AR agreements, onboarding processes and monitoring plans
• SM&CR alignment, including accountability mapping and Conduct Rules implementation
• Redress exposure analysis to help you understand potential FOS and FSCS impacts

Whether you are an established principal or considering using ARs for the first time, we can help you build a compliant, future‑proof oversight framework aligned with the direction of regulatory travel.

If you would like to discuss how these proposals may affect your firm — and how we can assist you in preparing — please get in touch.