The AR Regime Gets a Refresh

If you're an appointed representative (AR) or a principal firm hosting ARs, you'll want to pay attention to HM Treasury's consultation published on 12 February 2026. The proposals set out targeted reforms to strengthen consumer protection while preserving the AR model's flexibility — but they'll change how the regime operates for everyone involved.

The consultation closes on 9 April 2026, so now's the time to understand what's coming and consider whether to feed back your views.

What's Being Proposed?

HMT has put forward four main changes to the legislative framework:

A new "principal permission" (regulatory gateway).

For the first time, firms wanting to appoint ARs will need specific FCA permission to act as a principal. The aim is to make sure that principals have the right expertise, systems and resources in place before they take on responsibility for overseeing another firm's regulated activities.

If you're already a principal, you won't need to re-apply — existing firms will be "deemed" to have the permission. But the FCA will retain the power to vary or withdraw it if your oversight arrangements fall short, so this isn't a free pass.

For new firms wanting to enter the principal market, the permission will be built into the standard authorisation process. That means you'll need to demonstrate your oversight capability from day one — and in a market that's already seen consolidation over recent years, this could make it harder for new hosting providers to get established.

Extending Financial Ombudsman Service (FOS) jurisdiction to ARs.

Right now, if an AR acts outside the scope of what their principal agreed to be responsible for, consumers can fall through the cracks when it comes to complaints. HMT's proposal would give the FOS power to investigate and direct redress against the AR directly in those specific circumstances.

This doesn't let principals off the hook — they'll still be responsible for the vast majority of complaints — but it does close a consumer protection gap that's existed for too long.

Bringing ARs into the Senior Managers & Certification Regime (SM&CR).

ARs currently sit outside SM&CR, which creates an inconsistent regulatory framework between principals and the firms they're meant to be overseeing. The proposal would bring ARs into line with authorised firms, replacing the outdated Approved Persons Regime that still applies to AR staff.

For principals, this could mean a new dedicated Senior Management Function (SMF) specifically for AR oversight — raising the bar on accountability at the top of the firm.

Tidying up "tied agents" provisions.

Finally, HMT proposes repealing redundant provisions around "tied agents" (a hangover from EU MiFID rules) and shifting detailed AR requirements from statute into FCA rules. That shouldmake future updates more agile, though it also means firms will need to stay alert to FCA rule changes.

Why These Changes Make Sense

These proposed reforms are generally being seen as proportionate and well-founded — they're designed to tighten oversight and close protection gaps without dismantling a model that works well when it's done properly.

The AR regime supports innovation, competition and consumer choice. It allows firms to access financial services markets without the full burden of authorisation, and it lets non-financial businesses offer complementary products alongside their core services. HMT's approach preserves that flexibility while making sure consumers are better protected when things go wrong.

What Should You Be Thinking About?

If you're an AR, the main practical impact will be SM&CR applying directly to you and your staff. That means getting familiar with conduct rules, fitness & propriety standards, and certification requirements. Check out our eLearning courses and training courses.

You should also be thinking about your financial resilience — if the FOS can award redress directly against you in certain circumstances, do you have the right arrangements (insurance, reserves) to meet those potential liabilities?

And if you're considering whether to stay as an AR or seek direct authorisation, now's a good time to explore your options. At Adempi, we've supported both ARs transitioning to full authorisation and principals setting up or strengthening their oversight frameworks — we're always happy to talk through what makes sense for your business.

If you're a principal, expect the FCA to take a closer look at your oversight arrangements — even if you're grandfathered into the new permission. Make sure your systems, monitoring, management information and governance are up to scratch. And if you're thinking about entering the principal market for the first time, be ready to demonstrate robust capability from the outset; the bar is rising just as the market continues to consolidate.

Get in Touch

The consultation runs until 9 April 2026. Whether you're an AR weighing up your next steps or a principal preparing for closer scrutiny, Adempi's team of experienced FCA compliance consultants can help you make sense of what's ahead.

We've worked with firms across the AR spectrum — from those seeking authorisation for the first time to established principals refining their oversight frameworks — and we're here to provide practical, straight-talking advice tailored to your business.

Contact us to discuss how these changes might affect you, or explore our compliance support and authorisation services.

---

You can reach us at contact@adempi.co.uk or on 0203 925 4761 

Or to prepare your business for whats next or find out more about our services from the website: Adempi - FCA Compliance Consultants.