The Financial Conduct Authority (FCA) in the U.K. has opened a consultation on proposed changes to how financial institutions categorise clients and manage conflicts of interest. The proposals, set out in CP25/36, aim to simplify long-standing rules while keeping consumer protections firmly in place. Feedback is open until 2 February 2026.
For firms operating across wholesale and retail markets, this consultation signals a meaningful shift. The FCA’s message is clear: the existing framework no longer reflects how markets, investors and firms operate today.
Why The FCA Is Proposing Change
The review follows the FCA’s 2024 Call for Input and extensive engagement with wholesale firms. One consistent theme emerged: key parts of the current rules are outdated.
Client categorisation requirements have remained largely unchanged for more than 17 years. In practice, this has created friction. Some experienced investors are restricted by retail-level protections that no longer fit their profile. At the same time, rigid tests can fail to identify where less experienced individuals may be exposed to harm.
Conflicts of interest rules present a similar challenge. Over time, layers of EU-derived requirements have made SYSC difficult to navigate, increasing compliance effort without changing the underlying standards.
The FCA’s objective is twofold:
- Enable firms to serve genuinely professional clients more effectively
- Rationalise conflicts rules without altering their substance
These proposals support the regulator’s wider strategy to encourage growth, innovation and competitiveness, while maintaining trust in U.K. markets.
Client Categorisation: A More Flexible, Judgment-led Approach
Moving away from rigid numerical tests – The FCA proposes removing mandatory quantitative criteria, such as trading frequency and portfolio size. These measures are seen as poor indicators of real investment knowledge and, in some cases, open to misuse.
Introducing a wealth-based opt-out route – Individuals with £10 million or more in investable assets would be able to opt out of retail protections without completing a qualitative assessment. This route would still require clear warnings and informed consent.
Strengthening qualitative assessments – For other elective professional clients, firms would need to take a more holistic view. Assessments must consider financial resilience, investment knowledge, understanding of risk and investment objectives. Reliance on self-certification alone would no longer be permitted.
Clear consent and safeguards for customers – Customers must actively request professional status and sign an informed consent statement that explains the protections they would lose. Firms may inform eligible customers of the option but must not pressure or incentivise them.
Simplifying professional client definitions – The FCA plans to align thresholds for large undertakings and explicitly include special-purpose vehicles. This reduces differences between MiFID and non-MiFID business and removes unnecessary complexity.
A defined transition period – Firms would have one year from implementation to reassess all existing elective professional customers under the new framework.
Conflicts of Interest: Clarity Without Changing Standards
On conflicts of interest, the FCA is focused on simplification rather than substance.
- SYSC 10 would be streamlined into a single, coherent set of core obligations
- Existing standards would remain unchanged
- Firms would not be required to immediately update customer documentation and could align changes with their next policy review
- Minor wording updates would improve consistency across sectors
The FCA’s intent is to reduce duplication and make expectations easier to apply in practice.
What This Means for Firms
The consultation closes on 2 February 2026, with a policy statement expected later in the year. While implementation will involve some one-off effort, particularly around re-categorising customers, the FCA believes the long-term benefits outweigh the costs.
Now is the time for firms to assess how these proposals could affect their categorisation processes, governance arrangements and compliance and risk frameworks.
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If you’d like to understand how CUBE can help strengthen your client categorisation, governance and broader compliance and risk frameworks, get in touch with our team.