FCA consulting on strengthening client categorisation rules; firms required to review existing customers against new standards

On 8 December 2025, the Financial Conduct Authority (FCA) published a consultation paper (CP25/36) outlining its proposals to amend the client categorisation rules in COBS 3, to strengthen safeguards and ensure a robust process in client categorisation. The consultation closes on 2 February 2026.

The proposed changes aim to: (i) prevent poor practices in the categorisation of retail clients as having an elective professional status (e.g. offering clients incentives to 'opt up' to elective professional status, based on its representation as a higher status); and (ii) support individuals with significant expertise or substantial resources to access products and services that would better meet their needs, by removing rigid assessment criteria.

In summary, under the proposed rules, firms will be able to categorise a client as an elective professional client only if:

1. either:
• the client has investable assets (a portfolio of designated investments and/or cash) of at least GBP10 million; or
• the firm has undertaken a holistic qualitative assessment of the expertise, experience and knowledge of the client and is satisfied on reasonable grounds that the client is capable of making investment decisions and understanding of the risks in relation to transactions that the firm may undertake with the client/the products and services the firm may offer; and
2. the client has requested the categorisation and has given informed consent, by signature, to opting out of retail protections; and
3. the categorisation is compatible with the firm’s obligations to act honestly, fairly and professionally in the best interests of the client and under the Consumer Duty.

The FCA intends to specifically prohibit practices intended to incentivise, induce or pressure clients into opting out of retail protections. Firms will also be prohibited from communicated a financial promotion to retail clients on specific products or services that is only available to professional clients (although general information can be communicated). However, the FCA is proposing to allow firms to initiate discussions with clients about opting out of retail permissions, where they have a reasonable basis for believing the client will meet the professional client threshold.

The FCA wants to ensure the integrity of the regime going forward and has therefore proposed that when the new rules come into force, firms will be required to review the categorisation of all existing elective professional clients against the new rules within one year of them coming into force. Some firms may need to request new information from existing clients to make an adequate assessment and may need to obtain new consent from clients to opt-up as a professional client (the FCA does not consider a client ticking a box to indicate consent to demonstrate informed consent required by the proposed rules). Firms conducting non-MiFID business will also need to review the categorisation of per se professional clients and elective eligible counterparty clients and consider whether they will need to be re-categorised.

For more information, please contact the authors or your usual DLA Piper contact.