Appointed Representatives: Treasury proposes a new regulatory framework and extension of FOS' jurisdiction

On 12 February 2026, HM Treasury opened a consultation setting out its proposals for reforming the Appointed Representative (AR) regime (the Proposals).

Should the Treasury proceed with implementing the Proposals, firms will require a new FCA permission to appoint ARs if they do not already have them. There will also be an extension of FOS' jurisdiction to deal with complaints against ARs for acts and omissions which fall outside the regulated activities for which the principal has accepted responsibility.

The Proposals

The regulatory framework

Under the current legislation, any firm authorised by the FCA is permitted to appoint ARs and act as principal. Subject to scope of business limitations, authorised firms do not need any further permissions or approvals. There is no requirement in the current legislation for authorised firms wishing to act as principal to demonstrate that they have the necessary expertise, resources and systems in place to provide effective oversight of ARs.

Under the Proposals, the FCA would be provided with a mechanism to scrutinise and ensure the suitability of firms wishing to appoint ARs. Firms which are successful in obtaining FCA approval would be provided with a new permission. To avoid disruption to existing AR networks, existing principal firms would not be required to apply for the new permission, albeit the FCA will be able to vary or remove the permission from principals which it deems fail to maintain high standards of AR oversight.

An amendment to s39 of the Financial Services and Markets Act 2000 (FSMA 2000) is proposed, with a view to making the regime more "coherent and user-friendly". S39 FSMA 2000 outlines the framework for the exemption of ARs and the liability of principals. It also sets out the various conditions to the application of the exemption. Under the Proposals, the amendment would provide that any detailed requirements relating to the contractual relationship between principals and their ARs, as well as the inclusion of ARs on the Financial Services Register, be set out in the FCA rules.

Extension of Financial Ombudsman Service's (FOS') jurisdiction

The Proposals also include an extension of FOS' jurisdiction to consider complaints against ARs.

FOS currently has jurisdiction to consider complaints against principals where the complaint relates to activities performed by their ARs, as long as the principal has accepted responsibility for the activities complained of. However, where the actions of the AR fall outside the scope of activities for which the principal is responsible, or where responsibility cannot otherwise be established, the current legislation means that FOS has to conclude that the complaint is outside of its jurisdiction.

The Proposals seek to fill this gap by ensuring the FOS can consider any complaint involving regulated activities carried on by an AR, including where that AR has acted outside the regulated activities for which the principal has responsibility.

Where a complaint is upheld, the FOS will be able to direct appropriate redress measures to the AR. In circumstances where an AR does not have sufficient capital to satisfy an award of redress – which is a real possibility given the FOS' redress limits – the Financial Services Compensation Scheme (FSCS) is able to award compensation under the current FSCS framework. Given the limited circumstances to which these changes will apply, the government does not expect there to be a material impact on the overall cost of FSCS compensation nor does it consider that the extension of FOS' compulsory jurisdiction warrants any changes to the FSCS funding model – although this will be kept under review by HM Treasury.

Bringing ARs within scope of Senior Managers and Certification Regime (the SM&CR Regime)

The SM&CR framework sets the standards for individual accountability and personal conduct within authorised firms. However, the previous regime (the Approved Persons Regime) still applies to ARs.

The Proposals state the same framework should apply to both principals and ARs, it is therefore proposed that ARs are brought within scope of the SM&CR Regime.

What do the Proposals mean for consumers and professional indemnity insurers?

The Proposals are likely to benefit consumers, who should no longer face challenges in circumstances where they are unable to establish that the acts or omissions of an AR are those for which the principal is responsible.

Furthermore, by bringing ARs within the scope of the SM&CR, the Proposals ensure that individuals at these firms are held to the same standards of personal conduct and fitness as those at authorised firms, creating a direct line of individual accountability.

What about for professional indemnity insurers? Under FCA rules, principal firms are required to hold compliant professional indemnity insurance to cover the activities of current and former ARs. Professional indemnity insurers will therefore want to bear in mind the proposed extension of the FOS' jurisdiction to include complaints in relation to rogue acts of ARs.

For any interested stakeholders, the consultation closes on 9 April 2026. The Proposals with directions for responding to the consultation can be accessed here.

For anyone who would like to discuss the Proposals, please feel free to get in touch with Whitney Simpson, Faheem Pervez or Ben Simmonds.