The FCA is consulting on proposals under consultation paper (CP) 25/36 to update client categorisation under the Conduct of Business Sourcebook (COBS) and to streamline conflicts of interest rules in the Senior Management Arrangements, Systems and Controls (SYSC) sourcebook.
The intention is to make requirements clearer and more consistent, without raising the underlying regulatory expectations for firms.
Client Categorisation Changes Focus on Clarity and Safeguards
The FCA proposes removing the prescriptive quantitative test for elective professional clients (except for local authorities), placing greater weight on a strengthened qualitative assessment. A new route will allow clients with £10 million in investable assets to opt up, provided they give informed consent and understand the protections they are giving up.
The FCA also plans to simplify the “per se professional client” criteria — the list in COBS 3 that automatically classifies certain entities as professional clients — and explicitly recognise special purpose vehicles (SPVs). The regulator also expects firms to review existing elective professional clients within one year of the rules taking effect. These updates aim to support clearer, more consistent decision-making.
Conflicts of Interest Rules are Consolidated for Ease of Use
Conflicts requirements currently spread across multiple chapters would be consolidated into SYSC 10, with the Insurance Distribution Directive (IDD) provisions in SYSC removed to eliminate duplication.
The FCA also proposes terminology harmonisation and introduces an express proportionality provision to ensure arrangements remain appropriate to each firm’s size and business model. The changes function as an organisational tidy-up, rather than a shift in regulatory standards.
Evidence of Implementation is Becoming a Clear Supervisory Expectation
Alongside the proposed rationalisation, the FCA continues to emphasise the importance of practical, evidenced governance. This includes maintaining accurate conflicts registers, clear escalation pathways, and demonstrable oversight — particularly in areas where conflicts are more complex. The direction of travel remains toward real-world implementation, not solely policy wording.
What Firms Should Do Next
- Align policies with the consolidated SYSC structure: Firms should use their next policy review cycle to ensure terminology and references align with the streamlined SYSC 10 chapter.
- Refresh qualitative assessment criteria: Document factors such as a client’s experience, knowledge, risk comprehension, and financial resilience more clearly in categorisation procedures, reflecting the strengthened qualitative framework.
- Prepare for the one-year re-assessment requirement: Plan for the FCA’s expectation to recategorise existing elective professional clients within one year of the new rules taking effect, based on risk and business model.
- Ensure governance materials evidence practical implementation: Review and update conflicts registers, oversight documentation, and escalation procedures to demonstrate that conflicts are managed consistently in practice.
- Monitor timing for AIFMD-related changes: Some elements linked to the Alternative Investment Fund Managers Directive (AIFMD) and the AIFMD Level 2 Regulation (EU No 231/2013) may depend on separate revocation or timing. Firms should stay alert to updates as they plan implementation timelines.
- Consider independent external support: As firms prepare for the FCA’s final rules, many may find value in seeking independent external insight to ensure their categorisation processes and conflicts frameworks remain proportionate, effective, and aligned with regulatory expectations.
Clarity, Proportionality, and Consistency Are at the Centre of CP25/36
The FCA’s proposals are designed to simplify and clarify without imposing new obligations. Firms that focus on alignment, strengthened governance, and practical implementation will be well placed as the rules move toward finalisation.
The FCA invites feedback on the proposals by 2 February 2026. Firms should monitor developments and prepare to implement changes in line with the FCA’s guidance.
Download the Detailed Briefing
For an in-depth review of the proposals, including terminology changes, rule mappings, proportionality provisions, and updates to personal account dealing requirements, download our comprehensive briefing to learn more.
Turn to Independent Expertise to Strengthen Conflicts Frameworks
ACA supports firms in interpreting and operationalising CP25/36. We provide independent challenge, benchmark frameworks against industry practice, and help update policies, terminology, and documentation to reflect the streamlined SYSC and revised COBS requirements. We also review client categorisation processes and conflicts frameworks to ensure they remain proportionate, practical, and aligned with regulatory expectations as the rules evolve.
Book a meeting to speak with a specialist on how these changes affect your firm’s conflicts framework.