FCA Consults on Reforms to Client Categorisation and Conflicts of Interest Rules

On 8 December 2025, the Financial Conduct Authority (FCA) published a consultation paper (CP25/36) proposing significant changes to the UK’s client categorisation rules in the FCA’s Conduct of Business sourcebook (COBS), as well as streamlining the FCA’s conflicts of interest rules in the Senior Management Arrangements, Systems and Controls sourcebook (SYSC). 

The aims of CP25/36 are to better distinguish clients who do not require retail protections, strengthen safeguards where protections are given up, and remove duplication in conflicts rules without changing substantive standards. 

Background 

CP25/36 follows the FCA’s 2024 Call for Input on Handbook simplification post‑Consumer Duty and the discussion chapter in CP24/24 on potential reforms to EU-derived conduct and organisational requirements. In July 2025, the FCA announced a review of client categorisation and, in September 2025, committed to resetting how wholesale firms distinguish between retail and professional clients. CP25/36 seeks to rebalance risk to support competitiveness while reducing harm from poor practices, such as mis-categorisation. 

Client categorisation

Elective Professional Clients 

The FCA proposes two routes to elective professional client (EPC) status (excluding local authorities): 

1. a wealth‑only route for clients with at least £10 million in investable assets (designated investments and/or cash), requiring informed, signed opt‑out but no qualitative assessment; and
2. a strengthened qualitative route requiring a holistic assessment against specified “Relevant Factors” (including occupational experience, investment history, financial resilience) and prohibiting reliance on self‑certification, click‑through questionnaires, or tick‑box tools. The mandatory quantitative test in COBS 3.5.3R(2) would be removed.

The FCA proposes that clients must actively request EPC status and provide informed consent, with clear disclosure of lost protections and sufficient time to consider implications. In addition, under the proposals firms may only initiate discussions about opting out where there is a reasonable basis to believe the client meets the professional threshold and must not incentivise or pressure clients. 

Per Se Professional Clients 

The FCA proposes to replace the list of entity types in COBS 3.5.2R(1) with a single concept covering any entity authorised or regulated in the UK or a third country to operate in financial markets and harmonise thresholds for large undertakings across Markets in Financial Instruments Directive (MiFID) and non-MiFID business. Special purpose vehicles controlled by authorised firms will be expressly included. 

Conflicts of interest

SYSC 10 would be streamlined across the UK’s MiFID, Undertakings for Collective Investment in Transferable Securities and Alternative Investment Fund Managers regimes to reduce duplication, with core duties to identify, prevent and manage conflicts unchanged. Key features include a general proportionality provision, harmonised terminology, a universal gifts and benefits policy, and reinforced guidance that disclosure is a last resort. 

Insurance distribution provisions in SYSC 3.3 would be deleted so all distributors follow the streamlined SYSC 10; equivalent changes for full‑scope UK Alternative Investment Fund Managers will commence when HM Treasury revokes the relevant Alternative Investment Fund Managers Directive Level 2 provisions.

The FCA also proposes a technical fix to non‑MiFID personal account dealing (COBS 11.7) to align fund exclusions with UK policy and is considering further technical consolidation of personal account dealing rules. 

Next steps

The FCA has asked for feedback on CP25/36 by 2 February 2026. 

CP25/36 is available here.