The Appointed Representatives Regime Is Changing. Here’s Why That Matters.

For some time now, the Appointed Representatives (AR) regime has been under scrutiny.
The FCA has been clear that, in some cases, principal firms have not had sufficient oversight of their ARs. Where things have gone wrong, the regulator has questioned whether supervision was robust enough and whether responsibility was always clear.

The Government’s current consultation, which closes on 9 April 2026, is the next step in that story.

This is not about removing the AR model. It is about tightening it.

Why is this happening?

The AR regime was designed to allow firms to operate under the umbrella of an authorised principal, with the principal taking responsibility for regulated activities. In practice, that means trust. The regulator trusts the principal to supervise properly, and consumers trust that there is accountability if something goes wrong.

Where that trust has been tested, the FCA has responded with more data collection, more reporting requirements and more scrutiny of principals. The current proposals take that one step further. They are designed to make oversight clearer, more structured and more accountable.

What is being proposed?

One of the most significant changes would be the introduction of a specific permission to act as a principal.

Currently, if a firm has the right permissions, it can appoint ARs. Under the proposal, acting as a principal would become something that requires explicit authorisation. In other words, firms would need to demonstrate that they are equipped to supervise ARs before being allowed to do so.

There are also proposals to tighten expectations around contracts and monitoring. The FCA is expected to introduce clearer rules about what must be in place between principals and ARs, and how ongoing supervision should operate.

Another notable proposal concerns complaints. If the Financial Ombudsman Service determines that a principal cannot be held responsible for an AR’s actions, it may be able to consider the complaint against the AR directly. That would introduce a different dynamic in terms of accountability.

Finally, there is a suggestion that the Senior Managers and Certification Regime (SM&CR) could apply directly to ARs, replacing the Approved Persons regime. The FCA may also create a specific Senior Management Function within principal firms focused on AR oversight. This would formalise senior responsibility for supervising ARs.

What does this mean in real terms?

The AR model is not disappearing. It remains a practical and valuable route to market for many firms.

But the message is clear.

The regulator wants to see evidence of structured oversight, not assumptions. For principal firms, that means being able to show how ARs are monitored, how risks are identified and escalated, and how senior management is involved. For ARs, it’s understanding that accountability may become more direct, and governance expectations may increase.

None of this necessarily requires dramatic change overnight. In many cases, it will be about strengthening documentation, clarifying responsibilities and ensuring oversight is consistent rather than reactive.

Our view

The AR regime has always relied on trust and accountability. The proposed reforms are about reinforcing both. Firms that take the time now to review their arrangements, rather than waiting for final rules, are likely to find the transition smoother.

If you would like to talk through how these proposals may affect your AR structure, we are always happy to have a conversation.