An appointed representative (AR) is a firm or individual in the United Kingdom that carries on certain regulated financial activities under the Financial Services and Markets Act 2000 (FSMA) without holding authorization of its own. Instead, it acts under a written contract with an authorized firm, known as the principal, which accepts responsibility for the representative's regulated activities. The representative is exempt from the general prohibition on unauthorized business only to the extent of the activities covered by that arrangement.
The regime allows smaller businesses, such as independent financial advisers, insurance intermediaries or mortgage brokers, to operate without going through a full authorization process with the Financial Conduct Authority (FCA). The principal, in turn, carries the regulatory risk of everything the representative does.
Legal basis
Section 39 of FSMA provides the exemption. It applies where a person is party to a contract with an authorized person that permits or requires it to carry on business of a prescribed description, and the principal has accepted responsibility in writing. The activities that can be carried on as an appointed representative are prescribed by secondary legislation and include, broadly, arranging and advising on investments, insurance distribution, certain consumer credit activities and home finance. Deposit-taking and other core prudential activities cannot be performed this way.
The FCA's detailed rules for principals are set out in the Supervision manual (SUP 12) of its Handbook. Principals must notify the FCA before appointing a representative, and ARs appear on the Financial Services Register under their principal.
How the appointed representative model works
The principal must have permission for the activities its representative performs and must supervise the representative as though the activities were its own. In practice this means checking the AR's fitness and solvency before appointment, monitoring its conduct, sales and complaints, ensuring its staff are competent, and terminating the relationship if necessary. Customers deal with the representative, but complaints and liability run back to the principal, and customers can take complaints to the Financial Ombudsman Service as they would against an authorized firm.
A variant is the introducer appointed representative, which may only introduce customers and distribute non-real-time promotions, without giving advice or arranging transactions.
Regulatory scrutiny
The FCA has repeatedly identified weaknesses in the AR model, including principals with many representatives and little oversight, and so-called regulatory hosting businesses that offer their permissions to third parties as a commercial service. Rule changes that took effect in December 2022 required principals to provide more information about their representatives, assess them annually and review whether their oversight is adequate. This scrutiny reflects a wider concern about regulatory arbitrage, where firms use structures to avoid direct supervision.
Comparison with payment and e-money agents
The appointed representative regime does not cover payment services or e-money issuance. In those sectors, UK law uses a separate agent framework under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011. A payment institution or an electronic money institution can register a payment services agent or an EMI agent with the FCA, and EMIs can also use an e-money distributor, which may distribute and redeem e-money but not issue it. The commercial logic is similar to the AR model: the licensed firm lends its regulatory status and remains responsible.
The US equivalent in money transmission is the agent of a licensed principal MSB, and in other sectors arrangements such as license sponsorship serve a comparable purpose, while a firm that wants US status of its own must obtain a license or charter directly, such as a Wyoming special purpose depository institution (SPDI) charter for digital asset businesses. Unlike EU passporting, none of these structures allows the representative to act outside the principal's own permissions.
Practical considerations
For a firm considering AR status, the benefits are speed and lower cost of entry. The constraints are dependence on a single principal, limits on the activities that can be performed, the principal's fees and controls, and the risk that the principal terminates the contract. Many firms use the AR route as an interim step before applying for their own authorization, which then requires meeting the threshold conditions directly and submitting each control person for approval.