On the 12 February 2026, HM Treasury published a consultation paper seeking views on proposed reforms to the Appointed Representative (AR) regime seeking to improve oversight and close gaps in consumer protection. One of the most significant proposals concerns a targeted extension of the Financial Ombudsman Service’s jurisdiction meaning that ARs could become the direct subject of complaints (and required to pay redress) for the first time.
The current regime
Under the current system, the FOS may only consider complaints brought against principal firms concerning the actions or omissions of their ARs if the principal is responsible for the AR's actions (under section 39(3) FSMA or agency principles). If the conduct of the AR giving rise to the complaint does not fall within the scope of activities for which the principal is responsible, the FOS has to conclude that the complaint is outside of its compulsory jurisdiction and it cannot therefore consider it.
Although this circumstance currently arises in a relatively small percentage of FOS cases, the government's view is that this creates a potentially significant gap in consumer protection. The government considers that it is unfair to leave consumers in these cases without access to the FOS to resolve disputes, as it leaves them unprotected in a way they are unlikely to anticipate. It thinks that FOS should be able to investigate complaints concerning regulated activities, regardless of whether the regulated activity is directly carried on by an authorised firm or through its AR.
The new proposals
Under the new proposals, the FOS would have jurisdiction to consider all regulated activities carried on by ARs. If the principal is not responsible for the actions giving rise to the complaint, the FOS would simply consider the complaint directly against the AR. If the FOS upheld a complaint against such an AR, the FOS would then be able to direct any appropriate redress measures to the AR. The FOS would be able to make the same sort of awards and/or directions in respect of an AR as it would be able to make against the principal.
The consultation paper makes it plain that this proposed reform is not intended to affect or diminish the control and oversight duties that principal firms have with regards to their ARs. That responsibility includes the principal taking reasonable steps to ensure that its AR is only carrying on regulated activities for which the principal has accepted responsibility, in accordance with FCA rules. Rather the government sees this targeted extension of FOS compulsory jurisdiction to be triggered as a measure of last resort.
The FCA is considering whether to make changes to the DISP Rules (which govern how complaints are handled) to ensure that where a complaint relates to the actions of an AR, the principal will make the AR aware of the complaint. The FCA will also consider whether to place an obligation on the principal firm to ensure that its AR co-operates with the FOS. It is anticipated that the FOS (with FCA approval) will make scheme rules which ensure that ARs are joined as a party to the complaint to ensure that they are involved in the complaint process and can make their own representations to FOS. Principal firms will also need to ensure that their AR contracts include appropriate dispute handling and redress mechanisms.
The proposed FOS reform sits within a wider package of measures aimed at modernising the AR regime, including a requirement for authorised firms to obtain explicit FCA permission before appointing ARs and more prescriptive requirements for the contractual arrangements between principals and ARs.
The consultation period
The consultation period is now open and stakeholders including principal firms, ARs, industry bodies and consumer groups, are invited to respond by 9 April 2026. The feedback received will shape the final approach. Whilst the new rules may not be implemented for some time, principal firms and ARs will need to start to assess the impact of the new regime and the extension of the FOS's jurisdiction, including revisiting their contractual arrangements and complaint handling processes and procedures.
