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

We are asking for comments on this Consultation Paper by 2 February 2026.

Online response form[4]

You can use the online form above. Alternatively, you can email [email protected] or write to Deirdre Boyd, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN.

We will consider the feedback we receive and plan to publish a policy statement finalising our rules.  

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[5]).
• Simplifying our conduct rules to reduce the burden on firms without impacting consumer protection (see our Call for Input[6]).
• Engagement with wholesale firms and their representatives over summer 2025.