Sentinel Regulatory Services news & information

HMT has issued a consultation on the Appointed Representative (“AR”) regime, which is open for eight weeks until 9th April 2026, seeking representations from any interested parties and stakeholders.

The consultation follows on from its policy statement issued on 11th August 2025, outlining proposals to safeguard the future of the UK’s Appointed Representatives regime (see Sentinel’s August 2025 Article, which supported the proposed changes).

The consultation builds upon the August 2025 Policy statement with one important extra addition discussed below.

1.      A principal permission

2.      Extension of FOS jurisdiction to ARs

3.      Bringing ARs within scope of the Senior Managers and Certification Regime (“SMCR”)

1.  A principal permission

By way of reminder, a principal is an authorised firm (like Sentinel) that is responsible for oversight of its ARs’ regulated activities. HMT quotes approximately 2,400 principals responsible for 34,000 ARs. Principals require appropriate skills, systems, resources, and robust controls to monitor their ARs effectively in order to ensure their client related regulated activities are compliant. Current legislation permits any regulated firm with the appropriate permissions to act as a principal, which has led to variable standards of AR oversight.

The intention is to remedy this gap by creating an explicit principal FCA permission intended to reinforce AR regime standards for new applicants. The FCA could then assess new principal applicants to ensure they have the necessary expertise, resources, and systems in place to provide effective oversight of ARs. The FCA would also have the ability to vary and cancel firms’ principal permissions in order to remedy any perceived material risks to consumers. Importantly, existing principals will not need to apply for the new permission.

The consultation paper also proposes the FCA revises its rule book to include the contractual requirements expected between a principal and its AR, which will allow the FCA flexibility to tailor the requirements to reflect the different types of AR activities. For example, the significant bulk of ARs are active in the retail sectors such as consumer finance, investments, and insurance, which have a significantly different risk profile compared to those ARs servicing professional clients.

Finally, the consultation paper proposes removing FSMA 2000 section 39A, which permitted Tied Agents to use their principals’ MiFID passports across the EU, which became redundant following Brexit.

2.  Extension of FOS jurisdiction to ARs

The Financial Ombudsman Service (FOS) provides consumers and firms with an independent and cost-effective way of resolving disputes when something goes wrong. FOS powers currently apply in relation to authorised firms, which means it can investigate complaints in relation to principals and their ARs acting within the scope of their agreed activities. However, the FOS cannot specifically investigate complaints generated by ARs acting outside the scope of activities agreed with their respective principals, resulting in a regulatory gap in rare instances. The proposal is to close the gap by extending FOS’s jurisdiction to consider complaints made in relation to the carrying on of relevant regulated activities by ARs.

Where the FOS determines that a principal firm is responsible for misconduct involving its AR and upholds a complaint against the principal, the FOS will continue to direct appropriate redress measures to the principal firm. Where the FOS determines that a principal firm cannot be held responsible for its AR’s acts or omissions, the FOS will now be able to directly consider the complaint against the AR itself. If the FOS upholds a complaint against such an AR, the FOS will then be able to direct any appropriate redress measures to the AR.

3.  Bringing ARs within scope of the Senior Managers and Certification Regime (“SMCR”)

Lastly, but by no means least, and not set out in the August 2025 consultation, HMT has proposed to bring ARs into the SMCR regime. Currently, ARs operate within the Approved Persons regime (“APR”) that was superseded by SMCR for most solo regulated FCA firms in December 2019 (how time flies). It has always seemed an anomaly that the APR continued to exist for ARs only.

This proposed change is justified on the grounds of harmonisation and reducing inconsistent treatment and unnecessary administrative burdens for both firms and the FCA. Indeed, the consultation notes the considerable potential reduction from the 38,000 AR Approved Persons requiring FCA approval. It also notes that the 2025 SMCR Leeds reforms could create a “more flexible and proportionate regime”. Sentinel would hope so, given the relative simplicity of many AR businesses operating in the professional client sector and the benefits accruing from keeping the AR regime flexible and attractive.

Conclusions

The consultation continues the rationalisation and modernisation process first proposed in August 2025. The transition from the Approved Person regime to SMCR has clear benefits but proportionate implementation will be key.

Responses must be submitted by 9th April via:

Email to: – AppointedReps@hmtreasury.gov.uk or

Post to: – Financial Services Strategy HM Treasury 1 Horse Guards Road, SW1A 2HQ