Consumer Duty 2.0? FCA announces plans to streamline its rules

On Tuesday 30 September, the Financial Conduct Authority (FCA) published 3 key documents:

1. an updated Consumer Duty workplan which sets out FCA priorities and sector-specific focus areas (Our Consumer Duty focus areas | FCA);

2. their letter to the Chancellor of the Exchequer on the application of the Duty to wholesale firms (Mansion House commitment on the Consumer Duty's application to wholesale firms); and

3. the results of their Consumer Duty requirements review update (Consumer Duty requirements review: update | FCA).

What are the key things you need to know?

From the updated Consumer Duty workplan:

• Data and fair value will continue to be areas of focus

• The FCA will take a sector-specific approach as follows:

  • Retail banking: focussing on fair value in SME current accounts.

  • Consumer finance: focussing on consumer understanding in the credit card market.

  • Consumer investments: focussing on consumer understanding of complex ETFs and loan-based crowdfunding.

  • Wholesale buyside: focussing on model portfolio services firms' implementation of the Duty.

From the FCA letter to the Chancellor on scope and application of the Duty:

• Proposals for Q4 2025 include:

  • Clarifying supervisory approach and expectations around co-manufacturing

  • Consulting on changes to client categorisation, including possible wealth-based thresholds and potential updates to the FPO and UCIS Orders.

• Proposals for H1 2026 include:

  • Consulting on removing business with non-UK customers from scope.

  • Clarifying how the Duty applies through distribution chains and reviewing whether current exemptions go far enough (e.g. for B2B activity).

From the requirements review update:

• No broader reviews (for now) of product governance (PROD), client asset (CASS) or Training and Competency (TC) sourcebooks.

• Focused work this year on conflicts of interest systems & controls (SYSC).

• Reforms to the Senior Managers Regime on the way.

• A series of sector-level roundtables is planned for 2026, with further updates to follow.

What is the Consumer Duty team's take on this?

Consumer Duty is firmly here to stay and firms in certain sectors (including retail banking, wealth management, model portfolio services and consumer credit) should be aware of the FCA's focus on their implementation of the Duty for certain product lines. However, the FCA is reconsidering some of the unintended consequences of the Duty's broad scope - intending to consult on the application of the Duty to distribution chains, co-manufacturers and non-UK customers. In practice, wholesale firms in particular may be able to de-scope some of their business from the Duty as a result of these changes.

Of particular interest is the FCA's proposal to review the client categorisation criteria and the suggestion that the FCA could introduce a wealth-based threshold for elective professionals. This could be a big change for firms currently constrained by the out-of-date and unnecessarily rigid MiFID elective professional test and bring the UK into line with some of its international peers.

The 'streamlining' proposals for the rest of the Rulebook are perhaps less radical than they could be, but will hopefully strike a balance between removing duplicative rules from the Rulebook and making change for change's sake.

The FCA also ask, again, for risk metrics from the Government and their degree of tolerance for consumer harm. This request was also made back in July (see our article here: Unlocking Growth: FCA Modernised Rules, Competitiveness & Innovation | Simmons & Simmons) but so far the Government has, perhaps unsurprisingly, been unwilling to provide any tolerable failure metrics.

Consumer Duty priority areas

The updated Consumer Duty workplan which sets out FCA priorities and sector-specific focus areas (Our Consumer Duty focus areas | FCA):

• The FCA will continue to publish good and poor practice examples throughout 2026, covering products and services, outcomes monitoring, and consumer understanding.

• The FCA and Information Commissioner's Office (ICO) will provide further clarity on the interaction between vulnerability, data sharing and data protection expectations in Q1 2026.

• Unsurprisingly, the provision of fair value will continue to be a focus, with the FCA carrying out a market study into pure protection insurance, investigating value in unit-linked pensions and long-term savings and a market study into premium finance.

Sector specific focus

The FCA will be focussing on issues in certain key sectors as follows:

• Consumer investments: The FCA is engaging with industry on (i) the poor identification of characteristics of vulnerability by wealth managers, (ii) expectations for wealth and advice firms when assessing fair value and (iii) risks of providing unsuitable advice. The FCA will also be focussing on whether firms are meeting Consumer Duty expectations for complex exchange traded products (ETPs) (findings due early 2026) and consumer understanding of loan-based crowdfunding (findings due end of 2025).

• Retail banking: The FCA will be focussing on fair value and consumer understanding in small-to-medium enterprise (SME) current accounts (FCA feedback due end of 2025).

• Wholesale buyside: In Q4 2025, the FCA will start looking at the implementation of Consumer Duty within model portfolio services firms (findings due summer 2026).

• Consumer finance: The FCA will be focussing on consumer understanding in the credit card market.

The application of Consumer Duty to wholesale firms

In their letter to the Chancellor of the Exchequer on the application of the Duty to wholesale firms (Mansion House commitment on the Consumer Duty's application to wholesale firms), the FCA set out their 4 point action plan to address concerns about the disproportionate burden on wholesale firms subject to the Duty.

The FCA want to:

• Review the application of the Duty to non-UK customers: A consultation, expected in Q2 2026, will consider removing business with non-UK customers from the scope of the Duty. The regulator has indicated it will "carefully consider the potential impact on consumers, including UK expatriates" before finalising any changes. This marks a shift in the scope of other existing regulatory protections and disclosure obligations (e.g. product governance), which currently do not distinguish between UK and non-UK clients. In practice, this could be a welcome step for firms manufacturing and/or distributing products outside the UK, particularly those that find it challenging to obtain information from firms across the distribution chain who are not in scope of the Duty. Firms may need to review onboarding processes, client communications, and product governance frameworks to prepare for potential changes ahead of the Policy Statement, expected by the end of 2026.

• Provide more clarity on co-manufacturing: The FCA will publish a statement in Q4 2025 clarifying their supervisory approach and expectations around co-manufacturing, to avoid "duplication of effort between firms". This could be particularly useful to wholesale firms who are only caught by the Duty by virtue of being a co-manufacturer with a proportionately smaller role in the manufacturing process. Firms may need to look at their co-manufacturing agreements and/or product governance processes in light of this.

• Review the Client Categorisation rules: The FCA plan to consult on updates to the client categorisation framework. This is not a new announcement (it was confirmed back in July, see our article here: Unlocking Growth: FCA Modernised Rules, Competitiveness & Innovation | Simmons & Simmons), but it is the first time that the FCA have indicated that they might consider introducing a wealth-based threshold for elective professionals; "We want to set clearer, up-to-date standards for firms to identify individuals capable of being treated as professional clients. We are considering complementing this with a new test at a high threshold of assets, to draw a brighter line for firms." We can expect a Consultation Paper by the end of 2025. The FCA also suggest that HMT look at reviewing the exemptions in the Financial Promotion Order (FPO) and the Promotion of Collective Investment Schemes Order to align with this work. Many firms will be following this consultation closely. As firms know, the current elective professional test is out-of-date and the inflexible quantitative criteria are often unnecessarily restrictive when it comes to opting up retail clients who have sufficient knowledge and experience to be elective professionals. We are pleased to see the FCA's direction of travel on this, as we have been working with our clients on advocacy on this point for several months now. If (or likely when) the elective professional criteria do change, firms will need to review their onboarding processes and procedures on a go-forward basis, and may also want to reconsider the categorisation of existing clients.

• Review distribution chains and exemptions: The FCA plan to consult on changes to rules on the application and requirements of the Duty, including through distribution chains and assessing existing exemptions and whether they go far enough, particularly in the B2B space. The FCA will also consider if there is a case for further exemptions from elements of the Duty where firms are subject to other regulatory obligations. In this context, designing and selling structured products is specifically mentioned. There has been a lot of industry discussion around the application of the Consumer Duty to pure wholesale manufacturers, so we are pleased to see that the FCA has taken this on board. This will be a welcome Consultation for wholesale firms who have no direct retail clients and could lead to some parts of their business being de-scoped from the Duty. This Consultation is expected to be published in H1 2026 with a Policy Statement by the end of 2026.

We note that the letter has a specific reference to the obligations of manufacturers relating to retail structured products in the context of preventing consumer harm. However, we understand that the FCA has emphasised to industry that this should not be interpreted as precluding any future rule changes in this area to reduce burdens on firms.

Streamlining the Rulebook

The FCA wants to focus on flexibility, predictability and efficiency. Their requirements review update (Consumer Duty requirements review: update | FCA) sets out their response to feedback gathered at the Regulatory Summit this July.

• On modernising the redress system; a package of measures is currently being consulted on and the FCA will share next steps alongside the Financial Ombudsman Service (FOS) in H1 2026.

• Focussed work will be done this year on streamlining conflicts of interest rules in the Senior Management Arrangements, Systems and Controls Sourcebook (SYSC) and taking forward reforms to the senior manager regime (SM&CR).

• There will be no broader reviews (for now) of the Product Intervention and Product Governance Sourcebook (PROD), the Client Assets Sourcebook (CASS) or the Training and Competence Sourcebook (TC).

• A series of sector specific FCA roundtables are planned for 2026 and a further update on next steps will also come next year.

Looking further ahead, the FCA has pledged to review the rest of its "core definitions", the retail customer definition, for example, and will share more on proposals in 2026. It will also review retail banking disclosures in 2026 to support consumer understanding.

As we say above, these streamlining proposals are not particularly extensive, some firms may have been hoping for more de-duplication of the Rulebook, around client disclosures, for example. However, we expect the FCA is trying to strike a balance between de-duplication and change for change's sake. We get the sense that the FCA will continue to consider streamlining and removal of overlapping requirements, but that at the moment there are other more substantive changes that are rightfully taking priority.