CP25/36: Client categorisation and conflicts of interest

Read CP25/36 (PDF)[3]

Why we are consulting

Client categorisation

We’re reviewing our client categorisation rules, to reset how firms distinguish between retail and professional clients.

We propose changes to:

• Remove the current COBS 3.5.3R(2) ‘quantitative test’.
• Enhance the qualitative assessment that firms carry out on clients.
• Introduce an alternative wealth assessment.
• Improve safeguards around clients opting out of retail protections.

Conflicts of interest

Over time, our conflicts of interest rules, which apply to almost all authorised firms, have become overly complex to navigate.  

We propose to rationalise the rules in the Senior Management Arrangements, Systems and Controls sourcebook (SYSC) 10 and SYSC 3.  

By reducing the length and complexity of the current rules, we seek to make sure our rules are proportionate and clear for firms to interpret and implement.

Who this is for

This consultation is likely to be of interest to:

• Authorised firms
• Cryptoasset firms
• Consumer organisations and individual consumers
• Industry groups/trade bodies
• Common platform firms  
• Insurance intermediaries conducting insurance distribution activity (in relation to conflicts of interest only)
• Insurers conducting insurance distribution activity (in relation to conflicts of interest only)  
• Alternative Investment Fund Managers (AIFMs)
• Managers of Undertakings for Collective Investment in Transferable Securities (UCITS)  
• MiFID optional exemption (‘Article 3’) firms
• Pension trustees  
• Third country firms

Next steps

This consultation has now closed. 

We will publish feedback on responses and issue a Policy Statement once we have reviewed your comments. 

We’ll monitor whether the client categorisation rules are effective through our supervision work.

Background

We are consulting on rule changes in response to feedback on:

• Potential reform to European Union (EU) derived conduct and organisational rules (see chapter 4 of CP24/24[4]).
• Simplifying our conduct rules to reduce the burden on firms without impacting consumer protection (see our Call for Input[5]).
• Engagement with wholesale firms and their representatives over summer 2025.