HM Treasury’s consultation, which was published on 12 February 2026, outlines significant reforms to the UK Appointed Representatives (AR) regime.

The proposals aim primarily to strengthen governance, accountability, and consumer protection within the current UK AR regime, ultimately creating better outcomes for consumers, which is one of the FCA’s top priorities. The feedback period for the consultation has now closed and HMT is reviewing all responses before publishing its next steps.

The AR regime was created to allow self-employed representatives to engage in regulated activities without having to be authorised, but over time, has evolved to include a wider range of models, such as regulatory hosting and networks. Through its reviews over the years, the FCA has identified growing consumer risks in the regime and in response, has taken a number of steps to address these concerns:

• Revising the rules in 2022 through Policy Statement PS22/11

• Enhancing its scrutiny of principal firms

• Applying more targeted supervision

While the government welcomed the above steps initially, following its review of the regime and drawing from stakeholder feedback, it has concluded that a broader legislative reform is necessary to ensure the regime remains robust and fit for purpose. The consultation does not directly introduce a new prudential regime for ARs but rather aims to close the gap in the regulatory framework.

The consultation confirms that ARs will continue to operate under the umbrella of their principal’s permissions, but also proposes major enhancements to the regime. These include tighter FCA oversight, a new permission gateway for principals, expanded Financial Ombudsman Service (FOS) jurisdiction, and the extension of the Senior Managers and Certification Regime (SMCR) to ARs, all designed to raise regulatory standards and strengthen consumer protection.

The government does not want to disrupt the business activity of existing principals and ARs or introduce unnecessary administrative burden to firms. However, the changes aim to respond to the fact that AR arrangements have, in some cases, produced higher levels of consumer complaints and misconduct risks.

Implications of the proposed reforms

We have outlined below the key changes which could materially impact ARs and principals.

New ‘principal permission’

The government proposes amending the Financial Services and Markets Act (FSMA) 2000 to introduce a new permission regime for the activity of an authorised person acting as principal. This would mean that in the future, firms wanting to act as principal will need to have received the relevant permission beforehand.

It is suggested that existing principal firms will not be required to apply for the new permission, as these firms would be deemed to have provisions from the FCA. The FCA will have the ability to vary or withdraw such permission in the future if that proves necessary to maintain AR standards and protect consumers.

Application of SMCR to ARs

A major shift is the proposal to apply SMCR directly to ARs. This will increase operational demands by requiring certification of AR staff as ‘fit and proper’, application of conduct rules, and enhanced accountability and governance processes. Although the detailed implementation is unknown at this point, it will raise the regulatory processes for ARs significantly.

Enhanced FCA rule‑making powers governing AR–to-principal relationships

HMT proposes migrating detailed AR contractual requirements from legislation into FCA rules, giving the regulator more flexibility to impose expectations tailored to the ARs, such as onboarding, training, reporting, and compliance procedures. Principals will be required to adapt their operational frameworks more dynamically in response to these changes to the FCA rules.

Increased oversight responsibilities with higher risk management requirements

The introduction of the principal permission means authorised firms will be expected to demonstrate robust systems and controls, adequate frameworks, effective ongoing monitoring and clear reporting and escalation processes.

Expansion of FOS jurisdiction

The Treasury intends to extend FOS jurisdiction directly to ARs that act outside of the business for which their principal firm is responsible. This increases AR risks because ARs may face direct complaint handling and remediation responsibilities, meaning principals must upgrade processes to manage complains, oversight and assurance, as poor AR complaint handling could trigger regulatory intervention or supervisory action.

What does this mean?

The proposed reforms will materially increase the expectations placed on ARs, with enhanced oversight from principals and a strengthened FCA role aimed at preventing misconduct and improving consumer protection. By bringing ARs within scope of the SMCR and extending FOS jurisdiction to cover them directly in certain circumstances, ARs will face higher conduct standards, clearer accountability requirements, and more robust regulatory scrutiny. Overall, the changes are designed to deliver a more consistent, transparent and resilient framework while maintaining the breadth and benefits of the AR regime.

Principal firms will similarly face materially higher prudential expectations through the introduction of the new principal permission gateway, requiring them to evidence sufficient resources and robust systems before overseeing ARs. Their operational oversight responsibilities will expand significantly, increasing accountability and potential regulatory exposure where AR governance is weak. As a result, many principals will need to invest in upgraded systems, enhanced controls and strengthened supervisory frameworks across their AR networks.

The HMT consultation has now closed to stakeholder feedback and further clarity is expected in due course. Once the necessary legislative changes to the AR framework have been made, the government and the FCA will publish a detailed plan and timetable for implementation. We will await the next phase of regulatory developments of the AR regime and provide an update once we know more about the changes.