Treasury Consults on Reforming the Appointed Representatives Regime: What Fund Service Providers Need to Know

Overview

HM Treasury has yesterday published a consultation paper proposing changes to the UK's Appointed Representatives regime — the framework allowing firms to carry on certain regulated activities without direct FCA authorisation, by operating under an authorised "principal" firm's licence.

The AR regime is big. The FCA says around 34,000 ARs operate under roughly 2,400 principals across UK financial services. In the fund world, the regime underpins the "regulatory hosting" model — where specialist providers appoint placement agents, capital raisers and fund advisers as ARs, enabling them to market funds, build investor relationships and arrange subscriptions without their own FCA authorisation.

The consultation closes on 9 April 2026.

Key Proposals

The consultation proposes three reforms. First, a new principal permission gateway: authorised firms will need specific FCA permission to act as a principal. This mirrors the financial promotions gateway introduced in 2024. The FCA will be able to grant, vary or withdraw permission, giving it a direct lever to intervene where a principal's oversight falls short. Importantly, existing principals will be grandfathered — they won't need to re-apply, though the FCA can vary or revoke their permission in future.

Second, FOS jurisdiction will extend to ARs directly, but only where the principal is found not to be responsible for the AR's conduct. This is a backstop. In the vast majority of cases, complaints will continue to run through the principal.

Third, ARs will be brought within the Senior Managers and Certification Regime, replacing the legacy Approved Persons Regime. This should significantly reduce the roughly 38,000 individuals in ARs currently requiring FCA approval, as many roles will shift to the certification regime where the principal itself assesses fitness and propriety.

Implications for Fund Service Providers

The headline for the fund sector is reassuring: the government has explicitly preserved the AR regime's broad scope. It considered — and rejected — restricting the activities ARs can carry on, limiting their size, or imposing direct FCA regulation on ARs. The regulatory hosting model remains intact.

That said, the principal permission gateway raises the bar for anyone wanting to operate as a host principal. This may accelerate market consolidation — smaller or less-resourced hosts may struggle to demonstrate the oversight infrastructure the FCA will expect. For established providers already investing heavily in compliance systems and experienced staff, this is arguably a competitive advantage. The principal permission regime will also make it harder for authorised firms that aren’t currently acting as principals to put in place ad hoc AR arrangements in the future (which might mean increased use of regulatory hosting services).

Fund advisers and placement agents operating as ARs should take comfort from the grandfathering provisions — no immediate disruption. But they should ask their principals what preparation is underway, particularly around SM&CR readiness.

Next Steps

The reforms require primary legislation to amend FSMA, so implementation is still some way off — realistically 2027 at the earliest. But the direction appears clear. Fund sector participants should consider responding by 9 April 2026, review their AR oversight frameworks, and start thinking about what SM&CR transition will mean for AR staff.