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The Financial Conduct Authority is planning to review its client categorisation rules to provide wealthy and experienced investors with greater access to investment opportunities whilst supporting capital markets growth.
The regulatory reform forms part of a broader initiative to deliver around 50 growth-supporting measures by the end of 2025, building on 10 initiatives already completed since January.
Current client categorisation rules protect retail clients investing in capital markets without imposing undue restrictions on professional clients. The FCA said reviewing these rules will ensure expectations remain proportionate when dealing with wealthy or highly experienced investors, providing confidence to firms and supporting capital markets investment.
"Modernising the client classification regime will provide greater clarity about the rules and protections applying to different customer groups, particularly for wholesale firms," said Nikhil Rathi, chief executive of the FCA. "We want to rebalance risk to support growth and competitiveness, which is at the heart of our strategy. We are delivering a large number of reforms to support a bolder risk appetite, making it easier for companies to raise capital and reimagining financial advice and guidance to boost investment."
The FCA's completed growth initiatives include establishing PISCES, a new private stock market making it easier to trade private shares, giving investors access to high-growth private companies typically unavailable until public listing. The regulator has also launched a Digital Securities Sandbox in partnership with the Bank of England, allowing firms to explore new technologies.
Other measures include extending pre-application support services to all wholesale, payments and cryptoassets firms. The FCA said it has supported 80 firms through pre-application meetings in the past year alone, encouraging firms to establish operations in the UK.
The regulator has also established a presence in the US and Asia-Pacific regions to promote UK financial services exports and attract inward investment. Additional initiatives include improving mortgage access by reminding lenders of flexibility in interest rate stress testing rules.
Work continues on other growth initiatives including changes to prospectus rules to support capital markets and eliminating unnecessary data reporting requirements to reduce regulatory burden. The FCA is also simplifying capital rules for investment firms, which would cut legal text volume by 70%.
These initiatives build on landmark changes to the listings regime made last year, which the FCA said has enabled 23 significant transactions to proceed more efficiently, improving market effectiveness.
London has retained its position as the second-highest rated financial centre in the most recent Global Financial Centres Index and has narrowed the gap to New York. The city now ranks first worldwide in the banking sector, compared to third place last year.
The FCA will publish its Secondary International Competitiveness and Growth Objective report on Thursday 10 July, highlighting progress on growth-supporting work. The regulator plans to consult on elective professional client categorisation later this year.
