UK FCA consultation on client categorisation and conflicts of interest

The UK Financial Conduct Authority (FCA) has published consultation paper CP25/36 as part of a set of publications forming a "landmark package to boost UK investment culture." The consultation sets out proposals to enhance client classification, creating a clearer boundary between retail and professional investors, and ensuring firms operating in wholesale markets are regulated proportionately and can operate with confidence when they are dealing with professional clients. Key proposals in relation to client classification are set out below.

This includes:

• An option for a client with investable assets of GBP10 million or more to give informed consent to categorisation as an elective professional client (referred to as an "alternative wealth assessment").
• Removal of the quantitative test set out in the Conduct of Business sourcebook (COBS) 3.5.3R(2).
• Enhancement of the qualitative test (referred to in the proposed new rules as the qualitative assessment), including removing the existing MiFID test and replacing the prescriptive requirements around procedure with a requirement that the client has explicitly requested to be treated as an elective professional client.
• Improved safeguards around how the firm interacts with clients during the elective process, with the FCA encouraging feedback on whether the consumer duty would be sufficient in place of the proposed new rules.
• Simplification of per se professional criteria.

The consultation also sets out proposals to simplify the existing conflicts of interest rules in the FCA Handbook, as set out in the Senior Management Arrangements, Systems and Controls sourcebook (SYSC) 10 and SYSC 3. The FCA considers this to be a rationalisation exercise with no intended policy change. The consultation also covers a technical point in relation to the non-MiFID personal account dealing rules which is being corrected. The deadline for comments is 2 February 2026.

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