FCA announces measures to boost investment culture
On 8 December 2025, the FCA unveiled a series of policy initiatives "to empower retail investment, reinforce wholesale markets and maintain the UK's position as a world-leading financial centre."
The package of measures includes:
a discussion paper on expanding consumer access to investments (DP25/3) (closes on 6 March 2026)
a consultation paper on client categorisation and conflicts of interest (CP25/36) (see below)
a policy statement setting out final rules for consumer composite investments, which replaces EU-derived disclosure rules for PRIIPs and UCITS (PS25/20).
In addition, the FCA confirmed that rules for target supported will be published shortly and provided an update on the Consumer Duty for firms that work together to manufacture products or services (see our Consumer Duty section below).
In CP25/36, the FCA is proposing the following changes to its elective professional client categorisation rules:
removing the quantitative test in COBS 3.5.3R(2)
improving the qualitative assessment that firms undertake
introducing an alternative wealth assessment
improving safeguards around clients who opt-out of retail protections.
Alongside these proposals, it is consulting on simplifying the criteria for categorisation as a per se professional client.
The consultation also covers proposed changes to the conflicts of interest rules in SYSC.
It closes on 2 February 2026.
HM Treasury update on provisional authorisation regime
On 4 December 2025, HM Treasury published a policy paper providing an update on the creation of a provisional licensing authorisation regime.
Following the government's Regulation Action Plan published in March 2025, the government has been working with the FCA to establish a new authorisation regime which aims to reduce the obstacles that financial services firms face when seeking authorisation.
The regime is expected to be most appropriate for early-stage firms with an innovative business model that would otherwise find it difficult to meet the threshold conditions in the Financial Services and Markets Act 2000 (FSMA) required to obtain authorisation in a reasonable timeframe.
The paper outlines how the regime is expected to operate once established.
Important points to note include:
The regime is intended for firms that are not already authorised and are seeking permission under Part 4A of FSMA for activities already within the FCA's perimeter.
The purpose of the regime is to support firms with obtaining full authorisation during or at the end of the provisional licence period. Once they have achieved full authorisation they will exit the regime.
The FCA's approach to assessing applications for provisional licences against the threshold conditions will be proportionate. This means that it will take into account the firm's stage of development and the fact that the firm has applied for a time-limited authorisation.
Firms will need to show that they can meet the threshold conditions for the period of the provisional licence. This will include having appropriate resources (both financial and non-financial) for the period of the provisional licence only, allowing them the time and flexibility to strengthen these further during the provisional licence period.
Provisional licences will apply for a fixed duration of up to 18 months. This may be extended in limited circumstances.
During the provisional licence period, firms will be subject to relevant rules and must continue to meet the threshold conditions. The FCA will engage with the firm during the provisional licence period and will retain its full range of supervisory and enforcement powers.
The government will bring forward primary legislation to introduce the regime when parliamentary time allows. The FCA will engage with industry on the design of the regime and consult as required.
FPC assessment of bank capital requirements
On 2 December 2025, alongside the publication of its Financial Stability Report, the Bank of England (BoE) published the latest issue of Financial Stability in Focus (FSF). FSFs set out the Financial Policy Committee's (FPC) views on specific topics relating to financial stability. This FSF contains the FPC's assessment of capital requirements for UK banks.
Key points to note include:
Capital requirements. The FPC has determined that the appropriate benchmark for the system-wide level of Tier 1 capital requirements is now around 13% of risk weighted assets. This is a one percentage point lower than its previous benchmark of 14% benchmark (which it set out in 2015 in its first assessment of appropriate levels of capital requirements for the banking system, and which it restated in 2019). The revised benchmark equates to a Common Equity Tier 1 ratio of approximately 11%. The FPC says that the reduction is consistent with how the financial system has evolved since 2015, referring in particular to a fall in banks’ average risk weights, a reduction in the systemic importance of some banks, and improvements in risk measurement.
Buffers. The FPC will work together with the Prudential Regulation Authority and international authorities to improve the usability of regulatory buffers in order to reduce incentives for banks to maintain capital exceeding regulatory requirements.
Leverage. The FPC will review how the leverage ratio has been implemented in the UK. As part of this review, it will prioritise an assessment of the UK's approach to regulatory buffers in leverage ratio requirements. The FPC is concerned that a drop in banks’ average risk weights has resulted in the leverage ratio becoming the "binding requirement," or close to the binding requirement, for a growing number of banks, rather than risk-weighted requirements forming the binding constraint as intended when the leverage ratio was introduced in 2015. It notes that for three out of seven major UK banks, the leverage-based minimum requirements and buffers are the binding requirement for Tier 1 requirements at a consolidated level.
Interaction between capital requirements applying to UK lending. Many elements of the UK's "capital stack" are adjusted separately by reference to a bank's exposure to UK lending. There is a perception among banks that these requirements restrict domestic activity. The FPC supports work that the BoE is undertaking on the relationship between these different capital components.
Feedback on the FSF should be provided to the BoE by 2 April 2026.
On 2 December, the BoE also published its Financial Stability Report for 2025.
FSB chair letter to G20 Leaders
On 20 November 2025, the Financial Stability Board (FSB) published a letter (dated 18 November 2025) from its Chair, addressed to G20 Leaders ahead of their 2025 Summit.
Among other things, the Chair, following acknowledgment of the challenging economic outlook, calls for global efforts to modernise and strengthen financial regulations without financial stability.
Important points noted in the letter include:
FSB Implementation Monitoring Review October 2025. The review identified significant gaps in the implementation of G20 financial reform.
Increasing role of non-bank financial intermediaries. FSB is assessing the implications of the growing existence of intermediaries on financial stability, with the July 2025 recommendations of the FSB highlighted as a key step forward on leverage of non-banks.
Cross-border payments and digital assets. Cross-border payments remain slow, expensive and inefficient, with current progress insufficient to meet G20 targets. Urgent acceleration is needed, including addressing national policy constraints such as capital controls.
The FSB's work programme will focus on stablecoins and other payment forms, emphasising the need for effective frameworks that support safe innovation and cross-border operation.
FCA updated statement of policy on regulatory failure investigations
On 14 November 2025 the FCA published its updated statement of policy on statutory investigations into regulatory failure.
The FCA is required, under Part 5 of the Financial Services Act 2012, to investigate and make a report to HM Treasury where it considers there has been a serious failure in the system of financial regulation, or in the operation of that system.
In the statement of policy, the FCA sets out its approach for determining whether a regulatory failure has occurred, its process for the undertaking of an investigation into such regulatory failure and details its reporting process to HM Treasury.
Important updates to the statement of policy since 2013 include:
The addition of the following new objective. When discharging its general functions, the FCA must facilitate the international competitiveness of the UK economy and its medium to long term growth.
The revision of monetary thresholds for determining 'significance'. The thresholds have been revised in line with inflation, creating a range of total gross consumer detriment of £45 million to £210 million to assist in determining whether the effect of the relevant events is 'significant'.
Where detriment exceeds £210 million, the FCA is more likely to consider the adverse effect significant, whilst detriment below £45 million is unlikely to meet the threshold unless qualitative factors apply, such as consumer vulnerability.
IOSCO final report on neo-brokers
On 12 November 2025, the International Organisation of Securities Commissions (IOSCO) published its final report on neo-brokers (the Report)
Neo-brokers are a sub-set of digital-first broker-dealers that provide services, with limited human interaction, through a business model characterised by their use of engaging client interfaces, leverage of social media and provision of online-only investment services.
The IOSCO recognises the importance of the neo-broker business model for enhancing market access. However, its report highlights risks associated with the business model and provides five key recommendations for regulators and firms to ensure that neo-brokers operate in an environment that prioritises investor protection and market transparency.
The recommendations are:
Act honestly and fairly. Neo-brokers should act honestly, fairly and professionally with retail investors.
Appropriate disclosure of fees and charges. Neo-brokers should provide appropriate disclosure of material fees and charges the retail investor may incur by entering the trade.
Ancillary services disclosures. Where neo-brokers offer ancillary services to core trade execution services, IOSCO members should consider whether neo-brokers should disclose to retail investors the material sources of revenue that the firm derives from each service and, where relevant, the type of conflicts of interest arising from them. They should also obtain retail investor consent before providing ancillary services.
Non-commission related trading revenue. Neo-brokers should consider the impact of payment for order flow on the best execution of customer orders. Factors that neo-brokers could consider include price of security, order size, type of security, type of order, trading characteristics of security, price improvement, as well as speed and probability of execution.
IT infrastructure. Neo-brokers should ensure they have robust systems in place to promptly address disruptions that may prevent investors from using their platform effectively.
The Report is the final milestone of the IOSCO Roadmap to Retail Investor Online Safety, concluding a year of spotlight on the new challenges to retail investor protection.
HM Treasury launches financial inclusion strategy
On 5 November 2025, HM Treasury published its new Financial Inclusion Strategy (Strategy), setting out a national plan prioritising the removal of barriers to financial participation and the building of financial resilience.
The strategy focuses on the following important areas:
Digital inclusion and access to banking. HM Treasury aims to deliver increased access to digital banking services through a pilot partnership between the largest banks and third sector to make it easier for individuals who lack standard ID to open bank accounts, the creation of 350 in-person banking hubs to secure access to banking services, and the creation of an 'inclusive design' government-backed industry working group focused on ways to make financial products more accessible for current excluded and underserved individuals.
Support for savings. HM Treasury aims to create an environment that supports individuals to build their savings through the delivery of regulatory clarity for employers that enables the offering of workplace savings schemes, and the launch of a national coalition for employers to drive awareness and adoption of workplace savings schemes.
Financial resilience through insurance. HM Treasury aims to close the protection gap through the launch of a pilot led by Fair4All Finance focused on analysing the uptake of contents insurance among social renters in England, the development of a signposting initiative to help individuals find the most appropriate insurance cover, the creation of a working group, led by ABI in collaboration with the Money and Mental Health Policy Institute and the FCA, focused on travel insurance for individuals with pre-existing medical conditions.
Access to affordable credit. HM Treasury aims to ensure individuals can access safe, affordable and responsible credit, through the launch of a £30 million fund to support credit union transformation in England, the support of a small sum lending pilot led by Fair4All Finance, and the development of an approach to tackle the impact of coerced debt on victim-survivors' credit files. Alongside the reform of the Consumer Credit Act 1974, the government will consider the merits of credit broking exemptions being extended beyond registered social landlords to capture other organisations who play a role in supporting consumers with their finances.
Tackling problem debt. HM Treasury aims to ensure individuals with problem debt are afforded fair treatment from creditors, through the provision of increased funding for the purpose of increase the ability of individuals to access specialist debt advice, the creation of referral partnerships to make it easier for individuals to reach debt advice, and (improved public sector and debt collection practices.
Financial education and capability. HM Treasury aims to ensure financial education is provided to young people, through most notably compulsory financial education at primary school level in England.
The Strategy noted that the financial services sector has a vital role to play in the promotion of financial inclusion, as the provider of financial products and services relied upon by consumers across the UK.
On 28 November 2025, the Treasury Committee launched a new inquiry focused on examining the Strategy. The deadline for responding to the associated call for evidence is 12 January 2026.
FCA speech on the role of the Chief Risk Officer
On 5 November 2025, the FCA published a speech delivered by Sarah Pritchard (Deputy Chief Executive, FCA) focusing on the critical role that Chief Risk Officers (CROs) play in responsible risk taking within firms.
Notable aspects of the speech include:
Outcomes focused regulation. Pritchard highlighted the FCA's commitment to outcomes-focused regulation with the focus being the reasoning behind its decision to not separately regulate for AI.
Problem solving and myth busting. The regulator wants to work collaboratively with industry to solve broader issues and is actively seeking input from firms on perceived regulatory barriers that may be preventing delivery of desired outcomes, acknowledging that CROs have a unique view of where regulatory barriers exist or where firms may be overcomplicating matters through custom and practice.
Rebalancing risk in practice. The speech provides the introduction of the Private Intermittent Securities and Capital Exchange System (PISCES) as an example of the FCA's rebalancing risk for growth strategy, with the world-first private stock market that unlocks capital by enabling companies to raise capital whilst staying private. The FCA deliberately applied "private market plus" safeguards, disapplying insider dealing rules and placing more emphasis on investor due diligence, publicly acknowledging this risk trade-off as necessary to support growth.
Call for help. Pritchard concluded by emphasising that the FCA recognises more risk is needed in the system to drive growth, and encouraged CROs to identify sticking points, myths requiring debunking, or missed opportunities, reaffirming the regulator's commitment to collaborative engagement with industry.
FCA guidance on Berne Financial Services Agreement
On 3 November 2025, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) co-published guidelines for firms on the Berne Financial Services Agreement (BFSA).
The BFSA will make cross-border trade in financial services to wholesale and sophisticated clients easier for UK and Swiss firms.
The guidelines for UK investment services firms are:
Notifications. UK firms must notify the FCA once before providing investment services to Swiss clients through client advisers in Switzerland on a temporary basis.
Conditions. Before starting to supply covered services (as defined under the BFSA), UK firms providing investment services into Switzerland through client advisers must provide covered clients with certain disclosures.
The guidelines for UK insurance firms within the scope of BFSA are:
Covered clients. Clients to whom a UK insurance firm may provide insurance services to under the BFSA must be incorporated in Switzerland and meet at least two of the three requirements listed in the BFSA when the insurance or intermediation contract is concluded, renewed or amended. The three requirements are that a client has a net turnover in excess of CHF 40 million, a balance sheet total in excess of CHF 20 million, and in excess of 250 employees.
Eligibility. The UK insurance firm must be an entity incorporated or formed under UK law, a resident of the UK, or the UK branch of a Covered Financial Services Supplier of Switzerland (as defined under the BFSA), be authorised and supervised as an insurer or insurance intermediary in the UK, and supply the relevant covered services in respect of risks located outside Switzerland.
Additional criteria also apply for insurers:
Notifications. To provide Covered Services, UK insurers must complete the required notification form which will be available on the FCA Connect system, and no later than 30 days following receipt of the firm's notification, the PCA and FCA together will confirm the FINMA whether the firm is eligible and of good standing. FINMA will, within 30 days of such confirmation from the PRA and FCA, include the firm on its public BFSA register, with the day of inclusion being the first day from which the firm can begin to provide the covered services in Switzerland. The PRA should be notified if an insurer does not provide covered services for risks outside Switzerland, even if permitted to do so in the UK. Following consultation with the notifying firm, the PRA will communicate the extent of the insurer's services outside Switzerland to FINMA for the insurer's registration under the BFSA to be restricted as appropriate.
Conditions. UK insurance firms providing services under the BFSA must comply with disclosure requirements to covered clients in Switzerland and annual reporting. Additionally, insurers must notify, through the FCA Connect system, FINMA and the relevant UK supervisory authority of any change relevant to its BFSA register entry.
Reporting. UK insurers must report annually to FINMA, with the form of the report capable of being submitted electronically and a copy automatically being provided to the PRA and FCA upon the initial FINMA submission. Reporting should cover the preceding 12-month calendar year, and the submission deadline date is expected to be 30 April. Reporting should provide the information set out in the BFSA and its MoU, including the name of the firm, the FCA and BFSA reference number of the firm, a list of the covered services supplied to covered clients, and the total value of gross premiums for activities carried out specified by type of covered services.
Court of Appeal considers FCA's client categorisation rules
As part of its judgment in Linear Investments Ltd v Financial Ombudsman Service Ltd [2025] EWCA Civ 1449 (delivered on 29 October 2025), the Court of Appeal considered the regulatory requirements for categorising clients as elective professional clients under COBS 3.5.3(1)R.
The Court held that firms cannot simply rely on tick-box responses when there are red flags requiring further enquiry. It noted that it is unlikely to be enough to satisfy COBS 3.5.3(1)R for a firm simply to require a client to complete general tick boxes containing statements in relation to their trading experience only.
Red flags in this case included:
The client's explanation of experience, which mentioned only blue chip stocks with no reference to CFDs.
Failure to provide supporting evidence, and inconsistencies in responses. The Court emphasised that "trading CFDs for speculative purposes is a materially different activity from buying and selling stocks and shares in the conventional way".
As part of its assessment under the quantitative test inadequate, the firm had not done enough to determine whether the client had carried out the specified number of transactions "in significant size, on the relevant market". The tick-box options did not specify which market the client had traded on or the lot size, making it impossible to make this determination.
The judgment reinforces the need for regulated firms to have processes which enable them to make a robust assessment of clients' expertise, knowledge and experience, in order to identify inconsistencies with the information provided, and to seek adequate substantiation of information. This is the case even if the client has made inaccurate statements.
As part of its growth agenda, on 8 December 2025 the FCA published a consultation paper on changes to its client categorisation rules - please see our general section for further details.
Source - https://www.taylorwessing.com/en/insights-and-even...