HM Treasury has launched a Consultation: The Appointed Representatives Regime , setting out significant reforms to the appointed representative (AR) regime, signalling a decisive shift towards enhanced consumer protection and stronger regulatory oversight.
The proposals centre on three core reforms:
- Extending the remit of the Financial Ombudsman Service (FOS) to certain complaints directly against ARs
- Introducing a regulatory “gateway” requiring specific FCA permission to act as a principal
- Bringing ARs within the scope of the Senior Managers and Certification Regime (SM&CR)
Collectively, these measures represent one of the most substantive recalibrations of the AR framework in recent years.
- Extending FOS Jurisdiction to Appointed Representatives
Under the current regime, where a complaint involves an AR, the FOS considers the role of the authorised firm (the principal). If the principal is responsible for the AR’s conduct, redress is payable by the principal. The Treasury now proposes a targeted expansion of FOS powers. In circumstances where the FOS determines that the principal firm cannot be held responsible for the AR’s acts or omissions, the FOS would be empowered to consider the complaint directly against the AR. If upheld, liability for redress would rest with the AR itself.
This reform is designed to address a narrow but significant regulatory gap, namely, situations where consumers may otherwise be left without access to effective redress.
Importantly:
- Principal responsibility for AR oversight remains intact.
- The reform is expected to affect a relatively small subset of cases.
- The change functions as a consumer protection safeguard rather than a wholesale restructuring of principal liability.
For ARs, however, this introduces direct exposure to FOS determinations and potential financial redress obligations, a development with clear implications for governance, controls and professional indemnity arrangements.
- Creation of an FCA “Regulatory Gateway” for Principals
The second pillar of reform addresses the ability of firms to appoint ARs. At present, any authorised firm may act as a principal without obtaining specific permission from the Financial Conduct Authority. Although FCA rules require principals to maintain robust oversight systems and controls, the Treasury considers the absence of a formal approval mechanism to be a weakness in the framework.
The consultation therefore proposes:
- A new requirement for firms to obtain explicit FCA permission before acting as a principal
- A power for the FCA to vary, restrict or withdraw that permission
- Greater supervisory scrutiny at the point of entry into principal activity
This “gateway” would allow the FCA to assess whether firms possess the operational capability, financial resilience and governance structures necessary to oversee ARs effectively. The regulator would also gain enhanced ability to intervene where AR activity poses material consumer risk. For firms operating AR networks, particularly larger or more complex structures, this signals increased supervisory intensity and potential re-assessment of oversight frameworks.
- Bringing ARs Within the SM&CR
The third proposal concerns individual accountability.
While principal firms are subject to the Senior Managers and Certification Regime, ARs currently remain under the legacy Approved Persons Regime.
The Treasury has characterised this as an inconsistent and outdated approach that:
- Applies different standards to similar activities
- Creates administrative inefficiencies
- Weakens accountability alignment across the market
The proposal would bring ARs within the scope of the Senior Managers and Certification Regime, ensuring that individuals performing equivalent roles are subject to consistent conduct and accountability standards.
For AR senior management, this could mean:
- Clearer allocation of prescribed responsibilities
- Enhanced conduct rule obligations
- Greater regulatory scrutiny of fitness and propriety
This alignment would represent a structural shift in the accountability landscape for ARs.
Regulatory Direction of Travel
The AR regime was originally designed to facilitate distribution of financial products through a relatively streamlined oversight model. Over time, it has evolved into a far more complex ecosystem encompassing investment distribution, fintech platforms, fund incubators and specialist advisory businesses. The Treasury’s proposals reflect regulatory concerns that the framework has not fully kept pace with that evolution.
Taken together, the consultation signals:
- A move toward closing consumer protection gaps
- Stronger entry controls for principal firms
- Greater direct accountability for ARs
- Enhanced supervisory flexibility for the FCA
For principals and ARs alike, the direction of travel is clear: heightened scrutiny, more formalised accountability and increased exposure to direct regulatory and ombudsman intervention.
What Firms Should Be Considering Now
Although the consultation remains open, firms should begin evaluating:
- Oversight models and documented control frameworks
- Contractual arrangements between principals and ARs
- PI insurance adequacy (particularly for ARs)
- Governance readiness for potential SM&CR extension
- Financial resilience to absorb potential redress exposure
Early engagement and gap analysis will place firms in a stronger position should these proposals proceed to implementation.
How Complyport Can Help?
At Complyport, we help firms manage evolving regulatory reporting requirements by:
- Regulatory Engagement and Supervisory Readiness: We help firms respond effectively to HM Treasury and FCA consultations, prepare board-level briefings and draft regulatory submissions. This includes supporting principals and ARs in articulating how they will meet enhanced oversight, complaints handling and accountability expectations, and demonstrating a proactive, risk-aware approach to regulatory change.
- AR Oversight and Accountability Frameworks: We assist principal firms in reviewing and strengthening AR governance arrangements, including responsibility mapping, escalation routes and documentation. For ARs, we support readiness for potential inclusion within the SM&CR, helping clarify individual accountability, conduct obligations and evidence of effective oversight.
- Complaints, Redress and FOS Readiness: We conduct gap analyses of complaints handling frameworks to assess preparedness for potential direct FOS jurisdiction. This includes reviewing contractual arrangements, financial resilience, professional indemnity cover and controls to ensure firms can respond effectively where redress liability may arise.
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