As part of our campaign to build a nation of investors, TheCityUK responded to the FCA's consultation paper on client categorisation and conflicts of interest. We believe the reforms are an important step toward reshaping who is treated as a retail vs professional client in the UK. This FCA classification determines the level of consumer protection afforded and the ability to access investment.
The proposals are an important step to deliver a regime better tailored to the specific features of UK markets, recalibrating the boundary so that client status more accurately reflects investors’ sophistication, financial resilience and risk understanding. The reforms seek to remove unnecessary complexity and ambiguity so that both firms and investors can clearly understand a client’s status and the associated protections, obligations and routes for redress.
Alongside a response to the specific proposals we set out:
- There remains ongoing confusion and complexity amongst regimes, for example, between this regime, COBS 3 client categorisation and the Financial Promotion Order. This continues to create operational complexity for firms.
- We support the FCA’s outcomes-based approach but would welcome clearer expectations in practice to reduce hindsight bias and increase legal certainty. In parallel with Financial Ombudsman Service (FOS) and redress reforms, firms need assurance that good-faith decisions made in line with the FCA’s rules and guidance at the time will not later be judged against retrospectively applied or shifting standards.
- We believe the proposed £10m quantitative wealth exemption threshold is set too high, which may limit access for a cohort of sophisticated investors and risks placing the UK at a competitive disadvantage relative to international peers.
- We believe that the FCA should work on the basis that not all products will be suitable for everyone. While we support the FCA opening access to individual investors, consumer protection should remain a key priority.
- We support the proposed updates to the relevant assessment factors, which we consider to be more aligned with modern investing behaviours, including increased self-directed investing and wider access to complex products.