UK FCA publishes consumer duty updates including in relation to wholesale firms

The UK Financial Conduct Authority (FCA) has published a letter to HM Treasury (HMT), addressing concerns about the consumer duty's application to wholesale firms. While the consumer duty aims to enhance retail consumer outcomes, the FCA clarifies that wholesale activities with minimal retail impact generally fall outside its scope. Following extensive industry engagement, the FCA acknowledges confusion and disproportionate compliance burdens. In response, it outlines a four-point action plan and suggests legislative updates for HMT to consider.

In particular:

• Clearer supervisory guidance and expectations to reduce misunderstanding and duplication of compliance efforts.
• A consultation to update the client categorisation framework, to help firms identify individuals who are capable of being treated as professional clients. A new high-asset threshold test is under consideration to complement this. The FCA also recommends HMT consider modernising the legislative exemptions in the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 to align with this work.
• A consultation in H1 2026 on rule changes on the duty's application and requirements, including through distribution chains and potential further exemptions for firms subject to other regulatory obligations.
• A proposal to exclude non-UK customers from the duty's scope, also expected in H1 2026.

Further, the FCA expresses interest in developing shared risk metrics with the UK Government and Parliament, which could help guide tolerance levels for consumer harm.

The FCA has also published two new webpages with further updates. The first webpage provides an update on how the FCA is streamlining its rules following the introduction of the consumer duty, including a summary of relevant upcoming consultation papers and policy statements expected later this year or in early 2026. The second webpage sets out consumer duty focus areas for 2025/26, including four cross-cutting projects and sector-specific priorities.

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