FCA proposes significant changes to client cat rules and rationalises conflicts of interest rules

The FCA has published a consultation (FCA CP25/36) outlining proposed changes to the UK client categorisation regime. 

A link to our full note on the proposals can be found here, however, we have set out the highlights below.

The proposed new approach would see the current prescriptive quantitative tests for elective professional clients replaced with

(i) an “enhanced qualitative assessment”, for which the FCA has proposed “relevant factors” which firms should consider as part of a holistic assessment; or 

(ii) a new wealth assessment test of £10m investable assets, in which case no further assessment would be required. 

The FCA has also proposed simplifications to the per se professional client criteria – in particular to make it easier to treat SPVs controlled by authorised entities as per se professional clients, and to align the per se professional criteria applicable to MiFID vs. non-MiFID business. 

These proposals (if finalised) are significant and should in theory make it easier for firms to opt up retail clients with the right experience and financial resilience/wealth to elective professional client status. Firms would need to review and amend their client categorisation processes, including the information that is obtained from clients – in particular, to ensure that appropriate information is received for the purposes of the enhanced qualitative assessment. The FCA consultation paper also helpfully suggests that firms should be able to proactively reach out to retail clients to offer them the option to opt-up – provided certain safeguards are complied with. 

Unhelpfully, however, the proposals however still apply stricter opt-up criteria for UK local public authorities and municipalities – which seems to be an odd policy decision, as it would seemingly become easier to opt up a natural person vs. a UK local public authority or municipality under the new rules.

In addition, the FCA expects firms to reassess the categorisations of:

(i) existing elective professional clients; and 

(ii) in respect of non-MiFID business, existing per se professional clients (because of changes to the criteria);

within 1 year of the rules coming into effect – which is likely to be quite a tight turnaround. 

Conflicts of interest: The FCA CP also proposes to rationalise divergent conflicts of interest requirements that apply to different types of regulated firms, which the FCA has suggested should not require firms to change their systems or processes. However, firms should still consider the proposals in detail, as there are likely to be incremental changes / differences that apply to them vs. the current rules they are subject to today.

The consultation closes on 2 February 2026. The FCA has not indicated when a policy statement on the final client cat rules may be published. 

The consultation is not clear on the timing for the effective date of the conflicts of interests changes – but given the FCA expects them to not have a substantive impact, we expect they will likely come into effect when published.