Under MiFID II a licensed investment firm can appoint another firm or an individual to act on its behalf. That appointee is a tied agent in most of the EU, and an appointed representative in the United Kingdom. The agent has no authorisation of its own. It operates entirely inside the permissions of its principal, and the principal is responsible without limitation for anything the agent does within the scope of the appointment.
That last clause is the whole design. Regulators were willing to allow an unlicensed distribution layer only because someone licensed carries the consequences. Every restriction that follows exists to keep that responsibility real rather than nominal.
What a tied agent may actually do
The permitted scope is narrower than most people expect. A tied agent may promote the principal's services, may introduce clients, may receive and transmit client orders and instructions, and may advise on the specific instruments the principal offers, where the principal has that permission and has trained the agent for it.
What the agent may not do is hold client money or client assets. That prohibition is absolute in the EU regime and it is the cleanest test of whether an arrangement is genuinely a tied agency. If money is landing in the agent's account, the structure is not a tied agency regardless of what the contract calls it. The rules on client fund segregation apply to the principal, and they cannot be delegated down.
An agent can also act for only one principal at a time in a given category of business. The exclusivity is deliberate. A firm distributing for three principals would create exactly the accountability gap the regime was written to close.
Registration is public and it matters
Tied agents are entered on a public register maintained by the competent authority of the member state where the agent is established. The entry names the principal. That makes verification straightforward for a prospective client: look up the agent, confirm the principal, then look up the principal and confirm its authorisation and permissions. Two lookups, both free, both on official registers. Anyone selling a service who cannot survive that check is not worth the second call, and the same method covers most of what our guide on checking a broker licence describes.
The register also tells you what the arrangement cannot be. If a firm claims to be regulated because it is a tied agent, the correct description is that it is registered and operating under the authorisation of a named licensed firm. The distinction is not pedantry. It determines who a client complains to, which compensation scheme applies and whose capital sits behind the relationship.
Tied agent status does not create passporting rights of its own. The agent operates within the principal's cross-border permissions, and where a principal has no permission in a country, the agent has none there either. Marketing into a market the principal cannot serve is a breach by the principal.
Why principals have tightened up
The model has been under supervisory pressure for years, and for a predictable reason. Some principals ran large agent networks with almost no oversight, collecting a fee per agent while doing nothing to monitor conduct. When agents mis-sold, the principal was liable and in several cases could not pay. Regulators responded by demanding evidence that principals actually supervise: pre-appointment due diligence, ongoing monitoring, complaints data, financial resources sized to the network, and annual attestations.
The practical effect on the market is that appointments now involve real diligence. Principals ask for business plans, client acquisition sources, marketing material for approval, and the identity of anyone who will speak to clients. Marketing approval in particular has become a bottleneck, because the principal signs off on every piece and inherits the consequences of the ones it misses. Firms that expected a light-touch relationship find the reality closer to the marketing approval process a fully authorised firm runs internally.
When the model fits and when it does not
Tied agency fits a firm whose business is genuinely distribution. If you have a client base, a marketing capability and no interest in running execution, risk or treasury, operating under a principal removes a licensing timeline that can run over a year and a capital requirement you would otherwise have to fund. You keep the client relationship. You give up product control and you accept that your principal can end the appointment.
It does not fit a firm that wants to be a broker. You cannot set your own spreads independently, you cannot hold client funds, you cannot choose your own liquidity arrangements, and you cannot take on business your principal declines. Firms that want those things need their own authorisation, with the capital and timeline that come with it, as covered in the piece on licence costs compared.
The other honest limitation is concentration. Your entire regulated existence rests on one relationship. If the principal loses permissions, exits the business or decides your risk profile no longer suits it, your ability to operate ends at the same moment. Build the commercial plan with that in mind, and read your termination clause with more care than the fee schedule.
This is a description of how the regime works, not legal advice. Requirements differ between member states and the UK regime has diverged since Brexit, so anyone considering the structure should take advice in the specific jurisdiction, alongside the wider questions covered in MiFID II.
"A principal firm signing a tied agent is taking on that agent's client complaints as its own. If the onboarding call feels casual, that is the warning sign, not a convenience."
— Roman Onta, Executive Director, SINGUARD
Key Takeaways
- A tied agent operates under a principal firm's authorisation, and the principal is liable without limitation for what the agent does in scope.
- Tied agents may introduce clients and transmit orders but may never hold client money or assets, which is the clearest test of a genuine arrangement.
- Appointments appear on a public register naming the principal, so two register lookups verify any claim of being regulated as an agent.
- The agent gets no passporting rights of its own and can only operate where the principal already has permission.
Frequently Asked Questions
Is a tied agent regulated?
Not in its own right. A tied agent is registered with a competent authority and operates under the authorisation and permissions of a named principal firm, which carries full liability for the agent's conduct within the appointed scope. The accurate wording is registered as a tied agent of a named authorised firm.
Can a tied agent hold client money?
No. The prohibition on holding client money or client assets is central to the regime. If funds are being received into the agent's own accounts, the arrangement is not a tied agency however it is described in the contract, and the principal is likely in breach.
Can a tied agent work for more than one firm?
Not within the same category of business. Exclusivity to a single principal is a design feature, because multiple principals would leave it unclear who is answerable for a given piece of conduct. Rules differ in detail between jurisdictions, so check locally.
About the Author
Roman Onta is an Executive Director at SINGUARD. He builds the Prop Firm CRM, the Broker CRM, Scalegram and CopySignals side by side with his brother Alex Onta, and he helped on the design of eTrader, the division Alex built and leads. His ground is worldwide payment processing, AML compliance and the corporate structures brokers are built on, work the two of them carry together, shaped by executive roles in the UAE and international corporates. He lives and works in Dubai for most of the year. Meet the executive duo leading Singuard's five divisions.