FCA Appointed Representatives Reform: What UK Firms Must Do Now

UK financial services firms that act as principals to appointed representatives must prepare now for the most significant reform to the AR regime since its creation — a new permission gateway, SMCR extension, and expanded FOS jurisdiction are all on the table.

HM Treasury’s 2026 consultation on reforming the Appointed Representatives (AR) regime, which closed on 9 April 2026, proposes wholesale changes to how principals can appoint and oversee authorised representatives. The proposals follow the FCA’s 2022 rules — themselves a significant tightening of AR oversight — and go further still. Under the UK Financial Services and Markets Act 2000, AR principals bear full regulatory responsibility for their ARs’ conduct. The reforms now propose to make that accountability structural: firms will need explicit FCA permission before they can appoint ARs at all. For compliance directors and CCOs at principal firms, the implications are operational, structural, and personal.

What Is HM Treasury Proposing to Change in the AR Regime?

The consultation proposes five major structural changes. First, a formal regulatory gateway: authorised firms would need FCA permission before acting as a principal, with the FCA holding power to impose conditions on, vary, or revoke that permission. Second, Financial Ombudsman Service (FOS) jurisdiction would be extended to apply directly to ARs in certain circumstances — not just their principals — exposing ARs themselves to formal complaint adjudication for the first time. Third, ARs would be brought within scope of the Senior Managers and Certification Regime (SMCR), with a dedicated AR Senior Management Function potentially created within principal firms. Fourth, existing principal firms would be automatically grandfathered into the new regime but would become subject to ongoing FCA review. Fifth, the FCA’s powers of intervention over AR arrangements would be significantly expanded.

According to analysis by Paul Hastings published in February 2026, the consultation represents “wide-ranging reforms” that will change the fundamental nature of principal-AR relationships. The Skadden review of the same consultation noted that the gateway requirement is the most significant proposal, because “the FCA would have the power to impose conditions on, vary or revoke” principal status at any point — creating a continuous compliance obligation rather than a point-in-time authorisation.

• Executive Action: Map your full AR network now — identify every appointed representative, the regulated activities they conduct, and whether your current oversight arrangements would survive an FCA gateway assessment.
• Commission a gap analysis against the proposed gateway criteria: the FCA will assess whether principal firms have adequate systems, controls, and oversight capacity before granting or confirming permission.
• Engage your legal counsel and compliance advisers on the grandfathering process — being automatically included in the new regime does not mean you are automatically compliant with its ongoing requirements.

How Does the Gateway Permission Change Principal Firm Obligations?

Under the current regime, becoming a principal firm requires no specific FCA permission — it is an arrangement that falls within an existing authorisation. The proposed gateway fundamentally changes this. Principal firms would need to demonstrate to the FCA that they have the governance infrastructure, oversight capacity, and financial resources to supervise their AR network responsibly before being granted permission to appoint ARs at all.

The FCA’s 2022 strengthening of the AR regime — which introduced new notification requirements, AR data submissions, and oversight expectations — was a precursor to this more structural change. According to HM Treasury’s consultation document, concerns about the AR regime have persisted since the FCA’s 2022 reforms, with evidence that some principal firms continue to use the AR regime to circumvent direct authorisation requirements. The FCA’s FCA Consumer Duty, effective July 2023, also applies to principal firms in respect of their ARs’ consumer-facing activities — adding another layer of accountability that makes the gateway proposal a natural extension of existing policy direction. Use INFORMD’s governance assessment tools to evaluate your AR oversight framework against the proposed gateway criteria.

• Executive Action: Review your current AR oversight framework against the FCA’s 2022 AR strengthening rules — any gaps here will be amplified under the proposed gateway regime.
• Assess whether your firm’s governance and resources are genuinely adequate for the AR network you currently supervise — consider whether some AR relationships should be terminated before the gateway regime takes effect.
• Engage the FCA proactively where your AR network has grown significantly since 2022 — the regulator will have heightened scrutiny of firms with large or rapidly expanding AR portfolios.

What Does SMCR Extension to ARs Mean for Senior Managers?

The proposal to extend the Senior Managers and Certification Regime to ARs — and to create a dedicated AR Senior Management Function within principal firms — is the element with the greatest personal accountability implications. Under the SMCR, named senior managers are individually accountable for the functions they oversee. A dedicated AR SMF would mean a named individual at the principal firm holding personal regulatory accountability for the conduct of the entire AR network.

This is not a theoretical risk. The FCA has demonstrated through multiple enforcement cases in recent years that it will use SMCR powers to pursue individual senior managers where oversight failures are identified. According to analysis by Travers Smith of the 2026 consultation, the SMCR extension to ARs would “reflect the responsibility that principal firms take on when appointing ARs.” For firms whose AR networks include advisers, brokers, or distributors operating in complex or high-risk product areas, the personal liability implications of a dedicated AR SMF are significant. Explore INFORMD’s executive briefing library for further analysis on SMCR personal accountability frameworks.

• Executive Action: Identify now who within your senior management team would hold the AR SMF if the proposal is enacted — do not wait for final rules to begin preparing the individual and the governance framework.
• Brief your board on the personal accountability implications of the SMCR extension — NEDs serving on boards of principal firms need to understand how this changes the firm’s risk profile.
• Review AR contracts and oversight agreements to ensure that information rights, termination provisions, and conduct standards are sufficient to support a named SMF’s accountability obligations.

How Should Compliance Leaders Respond Before Final Rules Arrive?

The consultation closed in April 2026. Final rules require primary legislation for some elements, meaning timing is uncertain — but the direction of travel is not. The FCA has made clear that its AR supervision will intensify regardless of the legislative timeline, and firms that wait for final rules before acting risk being caught in a remediation programme under existing supervisory pressure rather than a planned compliance transition.

The three highest-priority actions for compliance leaders are: first, conducting a comprehensive AR network review to identify any relationships that would not meet a gateway standard; second, strengthening oversight documentation — the FCA expects firms to hold evidence of how they have assessed, onboarded, and monitored each AR; and third, preparing a board-level briefing that sets out the current AR portfolio risk, the proposed reforms, and the firm’s readiness plan. The board of a principal firm is accountable for the firm’s regulatory standing — it needs to be informed, not surprised. Access INFORMD’s compliance framework templates to structure your AR regime readiness programme.

• Executive Action: Complete a full AR network review by Q3 2026 — categorise each AR by risk tier and document your current oversight controls against each relationship.
• Present a board paper on AR regime reform implications before year-end — include the proposed changes, current gaps, remediation plan, and personal accountability analysis for the future AR SMF.
• Submit a response to HM Treasury’s consultation if you have not already done so — the FCA uses consultation response patterns to identify firms with complex AR arrangements for supervisory attention.

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