The Appointed Representatives (AR) regime may be subject to potential reforms that could affect how principal firms are assessed, how ARs are governed and where accountability sits. However, proposals remain subject to the legislative process and should not be treated as confirmed changes or requirements.
Thornbridge Investment Management, a London, UK-based firm providing delegated fund management and support for firms operating as appointed representatives, has considered the potential direction of travel for the regime and why ARs and principal firms should remain conscious of these developments as they progress.
While it isn’t yet clear whether proposals will be implemented in full, partially or be subject to amendment, the existing responsibilities of principal firms already mean that effective oversight remains central to AR arrangements.
What Changes Have Been Proposed for the Appointed Representatives Regime?
HM Treasury published its consultation on proposed changes to the AR regime in February 2026. This followed a policy statement that set out the government’s intention to strengthen confidence in the framework, without amending its current scope or the benefits it provides.
The consultation proposed several changes, including introducing FCA permission for authorised firms wishing to provide services as a principal.
It also suggested bringing ARs into the Senior Managers and Certification Regime (SM&CR) framework, and extending the jurisdiction of the Financial Ombudsman Service to cover some disputes involving ARs where the principal isn’t responsible for the subject of the dispute.
Although the consultation closed on 9 April 2026, the FCA has also confirmed that, if legislative changes are made, it will then conduct a further consultation on the regulatory rules and guidance that will be needed to implement them.
This distinction is important because the proposals indicate the government’s intended direction of travel, but don’t automatically create new obligations. ARs and principals are expected to continue operating under the existing framework, but are advised to be aware of the potential changes that might come as a result of the consultation process.
What Could the Proposed Changes Mean for AR Accountability?
A further proposal to bring ARs within the SM&CR framework could create a greater alignment between the conduct, fitness and propriety requirements that are applied to ARs and those applying to authorised firms.
The consultation also proposes that the FCA could establish a new dedicated Senior Management Function for principals that have responsibility for overseeing ARs. This reflects the wider principle that senior individuals should be accountable for the firm’s ability to supervise its representatives effectively.
If implemented, these changes could clarify individual responsibilities within both principal and AR businesses. They may also require firms to review their existing governance structures, responsibilities and processes to determine whether they remain appropriate.
However, the exact requirements would depend on the legislation that may or may not be introduced and any subsequent FCA rules.
What Should ARs Look for in a Principal Firm?
For ARs, potential regulatory reform could prompt them to consider the quality of the principal relationship, rather than only whether a firm is willing to provide access to its regulatory permissions.
The strength of a principal’s oversight can directly affect how effectively an AR operates within the regulatory framework. Existing FCA expectations already require principals to have sufficient skills and resources to oversee their ARs, and monitoring should account for changes in the AR’s business, growth, and potential risks.
ARs considering a new principal, or reviewing an existing relationship, may wish to understand how the principal approaches initial due diligence and assessment of prospective ARs, ongoing compliance monitoring and risk assessment, and any changes to the AR’s business model or regulated activities.
They might also need to assess the principal’s policies around training, competence and fitness and propriety, reporting, management information and escalation and the circumstances in which an AR relationship may need to be restricted or terminated.
These considerations are relevant irrespective of the eventual outcome of the proposed reforms, because a principal that already has a robust approach to its oversight responsibilities may be better positioned to respond if the regulatory framework develops further.
Preparing for Potential Regulatory Change
Although it may be too early for firms to assume every proposal in the consultation will become a regulatory requirement, the consultation does indicate areas where policymakers believe the existing framework could be strengthened.
For principal firms, this may be an appropriate time to review governance and oversight without waiting for legislative changes to be confirmed. This could include assessing whether resources remain sufficient as AR businesses grow, whether responsibilities are clearly allocated, and whether monitoring results in meaningful information.
For ARs, a strong principal relationship should provide appropriate oversight while allowing the AR to understand its own responsibilities and operate within the agreed scope of its appointment.
The outcome of the consultation process will determine how far the proposals progress and what any resulting requirements will look like. Until then, firms should avoid treating proposals as confirmed new rules while continuing to monitor relevant announcements from HM Treasury and the FCA.
