FCA consults on liberalising client categorisation, and rationalising conflicts of interest rules

Overview and purpose  

On 8 December, the FCA published Consultation Paper CP25/36 on client categorisation and conflicts of interest.

The FCA proposes two sets of changes:

1. a reset of the client categorisation regime to widen appropriate access for sophisticated or very wealthy clients, rationalising per se professional categorisation, while clarifying other safeguards;
2. a rationalisation of conflicts of interest rules (SYSC 10) to simplify navigation without changing substantive obligations.

The consultation closes on 2 February 2026, with a policy statement to follow subject to finalising rules. 

Client categorisation: key proposals

• Liberalising elective professional opt ups: Currently, for retail clients to be “opted up” to professional client status, firms must look at a combination of qualitative criteria and rigid quantitative tests. This has often been criticised for creating somewhat arbitrary distinctions. The FCA proposes to liberalise the regime in a number of ways:
  • Removal of the current quantitative test: The rigid MiFID-derived trading frequency and portfolio-size criteria would be deleted (except for local authorities), addressing “gaming” of the rules while reducing barriers for clients with relevant expertise but atypical trading profiles. 
  • Qualitative assessment: For clients not using the wealth route (see below), firms must conduct a holistic, outcome‑based assessment using specified factors, including: occupational experience (inside or outside financial services), personal trading and investment history, knowledge and ability to assess risk, financial resilience and loss‑bearing capacity, objectives for opting out, and adverse indicators (e.g., vulnerability). Firms may not rely solely on client self‑certification or manifestly inaccurate/out‑of‑date information.  
  • Alternative “wealth-only” route: A new path to elective professional status for individuals with at least £10 million in net investable assets (cash and/or designated investments). Where used, no structured qualitative assessment would be required, but the client must give informed consent and the firm must meet best‑interests and Consumer Duty standards as applicable. 
  • Informed consent and communications: Firms must obtain “informed consent” by signed confirmation, with clear, prominent warnings about protections foregone and sufficient time to consider. Firms may proactively provide balanced factual information about opting out where they reasonably believe the client is likely to meet the professional threshold. 
  • Ongoing safeguards: No blanket periodic reassessment requirement, but firms must reassess if aware (or should reasonably suspect) a client no longer meets the professional threshold and clients must be able to withdraw consent at any time. Firms should maintain robust records evidencing the basis of categorisation and assessments. 
• Per se professional simplification: The FCA proposes rationalising the per se professional list by:
  • replacing the long list of authorised entities with a clearer rule that any entity authorised or regulated in the UK or a third country to operate in financial markets is per se professional;
  • expressly including SPVs as per se professionals;
  • harmonising “large undertaking” criteria by applying the existing MiFID thresholds across the board, but converting the relevant thresholds from Euros into GBP; and
  • removing certain non‑MiFID trustee routes (while retaining pension trustees).   
• Transitional arrangements: The FCA proposes that firms must conduct a one‑off review of all existing elective professional clients within 12 months of the new rules coming into force, reassessing against the updated standards and obtaining new informed consent where prior processes do not meet the new test. Certain per se professional (non‑MiFID) and elective ECP classifications must also be reviewed. Re‑notification is only required where categorisation changes. 

Conflicts of interest: rationalisation, not recalibration

• The FCA proposes to streamline SYSC 10, merging duplicative provisions across MiFID, UCITS, AIFMD and IDD into a shorter, clearer set of rules, with an express proportionality provision.
• Substantive standards are intended to be unchanged, though certain activity‑specific obligations will be presented more consistently and some requirements (e.g., inclusion of a gifts and benefits policy) will be explicit for all firms.
• IDD‑derived duplicative rules in SYSC 3.3 will be deleted and moved into SYSC 10.
• Transitional arrangements will defer application for full‑scope UK AIFMs until AIFMD Level 2 conflicts provisions are revoked.
• Personal account dealing rules will be corrected to ensure UK retail funds are covered by the existing exclusion for transactions (when the person is not involved in managing the fund).