Regulatory Reforms and Innovations

Unknown Speaker

Alright, Rachel, let’s dive straight in this week—CP25/36 just landed and it’s a bit of a whopper, isn’t it? Completely shakes up how firms look at client categorisation, and it’s not just another tick-box exercise anymore! Instead of that old quantitative test—you know, the three trades a quarter or whatever—they’re pushing for a much more outcome-based, qualitative assessment. So you basically need to really look at those “Relevant Factors” and understand the client’s knowledge, experience, and broader picture, not just rattling off numbers.

Rachel MacRae

Yeah, absolutely, and honestly, Vicky, that tick-box approach always felt a bit artificial, didn’t it? This feels, well, a bit more grown-up. I mean, now, if you’re treating someone as an elective professional client, you have to properly evidence it—make sure your records really show why you think they’re suitable. And then there’s this new wealth route, which I found quite intriguing. So if you’ve got over ten million in investable assets, you can opt out of retail protections, but only if there’s proper informed consent. No more just letting high-net-worths sign a form in two minutes!

Unknown Speaker

Exactly! The FCA’s really plugging the safeguards—firms have to spell out for clients what retail protections they’re giving up. It’s gotta be properly documented, not just a tick box at the bottom of a paper. And, if a client doesn’t quite get the implications, they stay retail no matter how much money’s sloshing about in their account. Kinda puts the onus on firms to slow down and explain things, which can only be sensible after what we’ve seen over the years. And about conflicts of interest—the rules aren’t changing dramatically, more just cleaning them up so they’re easier to follow, right?

Rachel MacRae

Yeah, so, streamlining SYSC 10, basically. Not extra obligations but clearer navigation. I reckon they’ve learned from how folks sometimes get confused about accountability—like, who’s on the hook if things go pear-shaped in multi-firm arrangements. Actually, a few episodes back we were talking about superficial client categorisation and patchy documentation. This feels like a direct response to that, doesn’t it? Drives home the point: thoughtful processes and decent records, or you’re really at risk with regulators.

Unknown Speaker

Exactly, and the consultation is open until February 2026, so plenty of time for feedback, but don’t wait if you’ve got gaps in your approach, that’s what I’d say. Even though the paper focuses on simplification, underlying responsibilities are still there—those haven’t gone away.

Rachel MacRae

So, moving on, let’s talk simplifications—CP25/37. Vicky, I know you’re a fan of anything that promises to cut out the deadwood from the Handbook! This one’s targeting COLL, CASS, and some insurance stuff. First thing that jumped out for me was COLL 5—they’re dropping some of the UCITS concentration rules, finally. I mean, those bits have caused headaches for years; the FCA finally admits they’re covered elsewhere anyway.

Unknown Speaker

Honestly, it’s about time! The COLL updates should make life a little easier, and—fingers crossed—reduce the number of little technical breaches we’ve all seen. But, where it gets really interesting for day-to-day compliance is the CASS changes. Now, due diligence records need to be kept for five years from creation, not from relationship termination. You know how much hassle it is chasing old files for dormant third parties. This should cut down on those persistent history file headaches, which always seem to crop up in audits.

Rachel MacRae

Exactly! It’s one of those changes that sounds small but could make audits, like, miles less painful. They’re also opening up accepted sources for custody reconciliations, so using Euroclear IFS becomes formally OK. And, for monthly statements, there’s finally some explicit flexibility if you genuinely can’t get data despite best efforts. That “reasonable efforts” bit is always where people get stuck—the FCA seems to be accepting reality here, which is nice for once.

Unknown Speaker

Yep, and let’s not forget the Consumer Duty thread running through all of this. A lot of these tweaks are about making sure things like interest on client money or securities lending are compatible with the Duty, so you can’t just rest on “permission”—you’ve gotta show it’s fair, good value, and won’t cause harm. It’s funny, we’ve circled around this theme for a few episodes now. Feels like the FCA’s tidying up all those legacy rules, especially for insurance and funeral plans, just binning outdated stuff that might cause more confusion than it solves.

Rachel MacRae

Yeah, like the old PPI or packaged bank account bits that don’t add anything these days with the Consumer Duty in force. Oh—and for the smaller firms, there’s a proposed guide to help with applying Handbook principles and spotting good versus dodgy practices. Should be piloted next year—finally some practical help rather than just more rules. And for anyone worried about deadlines, most of these simplifications should be immediate once the final policy lands in 2026, but there’s a three-month grace for CASS bits.

Unknown Speaker

Alright, final stretch—let’s talk CP25/39 and that new approach to pensions. There’s a move to make interactive digital pension tools the norm, as long as they’re genuinely outcome-driven. So, if your modelling tool uses actual contract data, you don’t have to stick with the rigid old COBS 13 projections. Instead, you get flexibility—run deterministic or stochastic scenarios, as long as outputs are clear, fair and, obviously, meet Consumer Duty. It’s all about helping savers engage with their retirement, not just ticking boxes, isn’t it?

Rachel MacRae

Yes, and I love that it pushes for more engaging annual statements too—firms can now chuck in those “what if?” projections about future contributions or retirement ages without waiting for permission. Makes pensions feel less like some arcane mystery box and more approachable for regular people. And then there’s this new step for DC-to-DC transfers, right? Before any paperwork starts, the firm helping the client has to grab key info from the old scheme and show it in a nice clear format—so people actually know if they’re losing valuable benefits, or if fees are wildly different. No more consolidating just for the sake of it!

Unknown Speaker

Honestly, about time! We see so many people who’ve never once looked at charges or options before a transfer. The FCA’s point that convenience shouldn’t lead to missed warnings rings true, especially with more assets moving around. And what about the provisional licence? That’s a real gear change, isn’t it?

Rachel MacRae

Yeah, big shift. The government’s looking at this new regime where start-ups, particularly innovative ones, could operate under a provisional licence for up to eighteen months—so, instead of jumping through every hoop from day one, they’d have modified requirements and a bit of breathing space. But standards still have to be met, like the usual “honest, open and cooperative” stuff. It’s not a free pass, more a proportionate start. They’ll need legislation for this, and the FCA will consult all of us before anything big changes. It could encourage more new ideas in financial services without that initial compliance wall being quite so daunting.

Unknown Speaker

Yeah, I mean, it'll be interesting to see where that goes. It strikes the balance between safeguarding standards and, well, actually letting new tech and models get off the starting blocks. We’ll keep an eye on the details as they emerge in the next consultations. That’s probably plenty for today—Rach, brilliant insights as always.

Rachel MacRae

Thanks, Vicky! Loads for listeners to take away and plenty more change on the horizon, so we’ll keep breaking it down as things develop. Have a good one—and see you next episode!

Unknown Speaker

Cheers, Rach. Just a little heads up that next week's podcast will be our last before the team take a little well earned break over Christmas. Thanks to everyone tuning in—don’t forget to subscribe to stay up to date. Bye, for now!