Appointed Representatives: UK Government Announces Two Targeted Reforms
- Simon Roberts
- Aug 14
- 3 min read
Reform of the Appointed Representatives (ARs) regime has been on the government’s agenda since at least the HM Treasury (HMT) call for evidence in December 2021. Now, HMT has published a policy statement setting out its approach to regulating ARs carrying on regulated financial services in the UK — and outlining two targeted proposals for change:
Introduction of a principal permission
Extension of the Financial Ombudsman Service’s (FOS) compulsory jurisdiction to ARs
While timings for consultations and legislative steps remain unclear, these changes are designed to address two specific gaps in the current framework.
1. Principal Permission – A New Regulatory Gateway
Under this proposal, authorised firms wishing to use ARs would first need FCA permission to act as principal. This would be achieved by amending section 39 of the Financial Services and Markets Act 2000 (FSMA) so that the AR exemption applies only where the principal has obtained the permission.
Key points:
Grandfathering: Existing principals won’t have to apply for the permission, but the FCA could still remove it where oversight standards aren’t met.
Oversight capability: Firms must demonstrate the expertise, resources, and systems needed to oversee ARs effectively.
FCA powers: The FCA could limit, vary, or revoke permissions to act as principal, just as it does with Part 4A permissions.
This aims to prevent AR misconduct before it occurs by ensuring only capable principals can appoint and supervise ARs.
2. Extending FOS Jurisdiction to ARs
Currently, the FOS can only investigate complaints where the principal is responsible for an AR’s actions. If the principal isn’t liable, the FOS has no jurisdiction over the AR directly.
The reform would allow the FOS to:
Directly investigate ARs where the principal isn’t held responsible.
Direct redress to ARs in upheld cases.
This targeted extension ensures consumers have consistent access to the FOS regardless of whether they dealt with an authorised firm or its AR — but it does not reduce the principal’s high level of oversight responsibility.
What This Means for Principals and ARs
These changes will raise the bar for principals:
New authorisation gateway for those wishing to appoint ARs.
Greater scrutiny of oversight frameworks and governance.
Continued accountability for AR conduct, even where the FOS acts directly against the AR.
For ARs, the extension of FOS jurisdiction means they will be more directly accountable for customer redress — and must ensure their own compliance and record-keeping standards are robust.
K2 Regulatory Consultants’ Perspective
At K2, we view these targeted reforms as a signal for principals and ARs to tighten oversight now — even before consultations on the details.
We can support firms in:
1. Principal Permission Readiness
Reviewing governance and resources to ensure readiness for the new gateway.
Building oversight frameworks that meet enhanced FCA scrutiny.
2. Oversight Framework Strengthening
Designing risk-based monitoring programmes for ARs.
Enhancing MI to detect and address misconduct quickly.
3. FOS Risk Preparedness
Reviewing complaint-handling frameworks to anticipate direct AR jurisdiction.
Training ARs on FCA conduct standards and complaint escalation routes.
4. End-to-End AR Model Review
Testing whether contracts, scopes, and controls fully align with regulatory expectations and Consumer Duty outcomes.
Preparing evidence packs for FCA supervisory engagement.
Bottom line: These changes may be labelled “targeted,” but their impact on governance and oversight will be significant. Firms that invest in robust principal–AR frameworks now will be better placed to navigate the new regime when it arrives.
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