Appointed Representatives Regime Reform - Most Significant Legislative Change in Two Decades
HM Treasury, London
HM Treasury published a consultation on 12 February 2026 proposing the most significant legislative changes to the Appointed Representatives (AR) regime in over 20 years. Key proposals include a new FCA permission requirement for principal firms wishing to appoint ARs, extension of the Financial Ombudsman Service's jurisdiction to AR activities, and application of the SM&CR to AR personnel. The consultation closed on 9 April 2026.
Context:
The AR regime allows approximately 34,000 appointed representatives to conduct regulated activities under the permissions of around 2,400 authorised 'principal' firms. It is widely used across wealth management, insurance distribution, consumer finance, and mortgage broking, making it a significant but structurally opaque part of the UK financial services landscape. Both the FCA and HMT have identified persistent problems: principal firms exercising insufficient oversight of AR activities, consumer harm resulting from under-supervised representatives, and limited regulatory accountability for AR personnel.
HMT's February 2026 consultation builds on FCA rule changes implemented in December 2022 (which strengthened principals' oversight obligations) and a policy statement from August 2025 setting out HMT's reform intentions. The new consultation proposes legislative changes to address structural limitations that rule changes alone cannot fix. Three proposals stand out: (1) a new FCA permission requirement for firms wishing to appoint ARs, creating a positive obligation to seek regulatory endorsement before entering the regime; (2) extension of the Financial Ombudsman Service's jurisdiction to cover complaints arising from AR activities in certain circumstances; and (3) application of the Senior Managers and Certification Regime (SM&CR) to key AR personnel, extending regulatory accountability deeper into the distribution chain.
The consultation closed on 9 April 2026. HMT will review feedback before determining whether to proceed with legislative changes, likely through secondary legislation under FSMA. While the proposals remain subject to the consultation outcome, the direction of travel is clear and firms that act as principals or ARs should begin assessing their governance and oversight arrangements now.
Rules and Guidelines:
Proposed: principal firms must obtain a new FCA permission before appointing any appointed representative, fundamentally changing the onboarding process for new AR arrangements
Proposed: the FOS's jurisdiction to hear complaints will be extended to cover certain complaints arising from AR activities, giving consumers a formal redress route against AR-related harms
Proposed: the SM&CR will apply to key AR personnel, creating individual accountability obligations (Conduct Rules, Certification) for named individuals within AR firms
Existing (FCA rule-level): principal firms already face strengthened oversight obligations under the December 2022 FCA rule changes, which sit alongside the proposed legislative changes
Proposed: AR agreements must include specific provisions for complaint notification and cooperation with the FOS
Proposed: AR firms will be subject to fit and proper assessments for key personnel, aligned with SM&CR expectations
Businesses Affected:
All ~2,400 principal firms across wealth management, insurance, mortgage broking, and consumer finance are facing new permission requirements and enhanced governance obligations
All ~34,000 appointed representatives, key personnel will face SM&CR obligations and fit and proper requirements for the first time
Compliance teams at principal firms must redesign AR onboarding, oversight, and complaints frameworks to meet the proposed requirements
Insurance networks and financial adviser networks that operate through large numbers of ARs, the operational scale of compliance change is significant
Fintech and comparison site businesses that use the AR regime for regulatory hosting arrangements may need to restructure if the new permission requirement increases cost and complexity
The FOS: jurisdiction will expand to cover AR-related complaints, capacity and case management implications follow
Next Steps:
The consultation closed on 9 April 2026. Principal firms and ARs that responded should track HMT's analysis and timeline for legislative implementation
Begin assessing existing AR arrangements against the proposed requirements: governance documentation, oversight frameworks, complaints notification provisions, and fit and proper assessments
Legal teams should advise on necessary changes to AR agreements and principal oversight frameworks in anticipation of the likely legislative changes
Compliance and HR teams should identify key AR personnel who will be subject to SM&CR if the proposals are enacted and begin planning for SM&CR implementation
Consumer-facing documentation for AR services should be reviewed to ensure FOS signposting and redress rights are correctly reflected, ahead of anticipated jurisdiction extension
Monitor HMT's response to the consultation (expected in H2 2026) for confirmation of which proposals will proceed and the proposed implementation timeline
Source | HM Treasury, Appointed Representatives Regime Consultation Paper
