Bite-size: AR reform 2026 – permissions, complaints and conduct rules
Executive summary
The government’s 2026 consultation proposes targeted reforms to the UK Appointed Representatives (AR) regime, including bringing ARs within the Senior Managers & Certification Regime (SM&CR) and strengthening oversight, while preserving the current broad scope of the AR regime. For firms, key compliance implications include obtaining the new FCA principal permission and updating policies and training to reflect the changes. Transitional provisions are proposed to minimise disruption: existing principal firms will be deemed to have permission (subject to future FCA conditions) and the FCA can vary or withdraw these permissions later. After the legislation is passed, HM Treasury and the FCA will publish a detailed implementation plan and timetable.
Scope and definitions
The reforms target the current UK AR regime. An Appointed Representative is a firm or person carrying on a regulated activity under the responsibility of an authorised principal. There are around 34,000 ARs operating under about 2,400 authorised firms. Key definitions (e.g. ‘AR’ and ‘principal’) remain as under FSMA. The changes will be subject to transitional timetables to be announced after the legislation is enacted.
Key compliance requirements
Principal permission (FSMA amendments): Authorised firms wishing to appoint ARs will need FCA permission to act as principal. Section 39 of FSMA will be amended so that the AR exemption only applies if the principal holds that permission. Firms already acting as principals will be grandfathered and deemed to have permission initially. The FCA can impose conditions on the permission and can later vary or cancel it.
Complaints and redress (FOS extension): The FOS’s compulsory jurisdiction will be extended to cover ARs. After implementation, if a principal cannot be held responsible for an AR’s misconduct, the FOS can investigate the AR directly. If the FOS upholds a complaint against an AR, it can award compensation (e.g. require the AR to pay redress). (The FOS does not impose fines.) Firms should be aware that this may increase AR liabilities and ensure ARs have sufficient resources or insurance for potential awards. The FCA will consider requiring principal firms to ensure ARs cooperate with FOS complaints handling.
Conduct and accountability (SM&CR extension): The SM&CR will be extended to ARs. All AR staff (excluding ancillary personnel) will be subject to the SM&CR conduct rules, and principals will be required to apply fit & proper standards to AR individuals under FCA rules. This change eliminates the need for FCA pre-approval of most AR roles – currently about 38,000 AR staff require FCA approval under the old regime. The FCA may also introduce a new AR Senior Management Function (AR-SMF) in principal firms to oversee AR activities. Firms should update HR and compliance processes accordingly (for example, by adding AR fit and proper reviews to annual reviews).
AR Contract and Register Rules: Detailed requirements for AR principals’ contracts and the AR register will be moved into the FCA Handbook. In practice, FSMA section 39 and the Appointed Representatives Regulations will be amended so that FCA rules set out contract conditions and registration criteria. Principals should review all AR contracts now and plan to meet any new FCA-prescribed standards once rules are finalised.
Tied Agents (FSMA s39A repeal): The government proposes to repeal section 39A of FSMA 2000. This removes the legacy ‘tied agent’ regime (which mainly applied to MiFID investment firms with agents outside the UK). Firms can update legal references accordingly.
Implementation (Transitional): As noted, existing principal firms will be deemed to have the new permission immediately upon commencement. These firms may maintain their current AR appointments without a fresh application, although they will remain subject to any future FCA conditions or enforcement. New firms seeking to act as principals must apply for permission when applying for FCA authorisation (Part 4A). Firms should flag this change in any authorisation plans.
FCA/PRA coordination: Although AR oversight is under the FCA’s remit, if a principal firm is PRA-regulated, the FCA will consult the PRA before granting permission. PRA-regulated firms should involve their PRA supervisors in planning, including providing PRA points of contact.
Implementation timeline: The consultation was published on 12 Feb 2026 and is open for eight weeks (closing 9 April 2026). After the consultation, HM Treasury/FCA will review feedback, make any final adjustments, and after legislation is passed will set out a detailed implementation plan and timetable. Existing principals will be deemed to have permission upon commencement.
Areas of Risk and Impact: The reforms will impose new compliance costs on principal firms (e.g. legal, system and reporting costs) as they establish AR permission processes and oversight. Firms should update AR policies and data systems accordingly. They should review and, if necessary, revise all AR contracts and internal checklists. In addition, firms need to consider cross-regulatory issues: if a principal is PRA-regulated, involve the PRA early (as noted above).
On redress, ARs (often small firms) may face direct FOS claims. Firms should ensure ARs have sufficient capital or insurance for possible compensation awards and be aware that more claims could reach the Financial Services Compensation Scheme (FSCS) if ARs default. (The government does not anticipate a major FSCS impact but is monitoring the issue.)
Compliance Checklist:
If the proposals are accepted these are some of the tasks that need to be considered:
Catalog all current AR relationships across the firm.
Determine if your firm (or its principal) will act as an AR principal. If so, plan to obtain the new FCA permission under Part 4A; include this in authorisation applications.
Update or create an AR oversight policy, covering the new requirements and, if introduced, the AR Senior Manager Function.
Revise complaints-handling procedures: principals should ensure ARs are informed of any customer complaints. The FCA may require principals to secure AR cooperation in FOS investigations.
Review all AR contracts: Plan to update contracts when the new rules are published.
Ensure your data and reporting on ARs are up to date (e.g. register entries, compliance returns).
Train senior managers, compliance, and legal staff on these AR regime changes (new permission, FOS extension, SM&CR changes).
Monitor official publications (FCA, PRA, HM Treasury) after April 2026 for the final implementation timetable and rule details.
Review any relevant recovery or risk plans (e.g. Senior Manager Functions) to incorporate AR oversight if needed.
