The FCA has today set out new rules for investment product information to allow firms to confidently operate with professional clients who don’t need retail protections.

It said its proposals will build a stronger investment culture supporting firms to innovate and make investing more engaging for consumers.

It is seeking views to make sure regulation supports consumers to invest with confidence. 

In retail investment disclosures the FCA said it will make a shift away from prescriptive and complex templates that consumers don’t find useful. It said that will give firms more freedom to put the consumer first, innovate and help their customers understand potential returns as well as costs and risks. 

The FCA is also seeking views on how longer-term regulation can keep up with the evolving retail investment landscape and help shift the dial on risk appetite, to give consumers confidence to access investments that meet their needs and benefit from the potential returns. 

The FCA said it is setting a clearer boundary between retail and professional investors, allowing firms to deal with professional investors with confidence operating outside retail regulations. It said that will free up firms to innovate and offer a more diverse range of products to truly experienced clients with the resources to bear more the risks.  

The regulator said the threshold to qualify as a professional investor will remain high, so only those with experience, advice, or the ability to bear risk are taken out of retail protections, such as the Consumer Duty, that they don’t neeIt said high standards in classification means ensures that wholesale regulation remains proportionate and firms are freed from unnecessary guardrails.

The FCA said the proposals remove some arbitrary tests and give firms more responsibility to get it right. That includes a new way for wealthy and experienced individuals to opt out of retail protections and streamline how firms assess professional investors.

Simon Walls, executive director of markets at the FCA, said: “Today’s measures support investment risk culture right along the spectrum. They ensure that firms can compete to give retail customers material that informs and engages them. They also draw a brighter line for professional markets, defined by contracting parties, informed consent, and regulation that is proportionate to that.” 

The FCA said the suite of measures will empower retail investment, reinforce wholesale markets and maintain the UK’s position as a world-leading financial centre.

Proposals to enhance how firms classify their clients will give confidence to firms when they deal with professional investors, drawing a line so wholesale markets can remain agile and innovative, the FCA said.

The regulator said it has worked closely with industry and consumer groups “to deliver practical policy that moves the dial on risk.”

It said rules for targeted support will be set out in the coming days.

Jonathan Parry, a partner in the capital markets group of global law firm White & Case, said:“This is another step in the right direction from the FCA that will add to the growing momentum in London’s IPO market, which is benefitting from the regulatory changes already introduced by both the FCA and the LSE that have helped levelled the playing field with other global listing venues.

“Fostering a stronger investment culture in Britian and boosting retail investor participation in the stock market will strengthen London’s competitiveness by increasing liquidity, improving access to capital for companies and bringing the UK more in line with other jurisdictions such as the US and Nordics, which benefit greatly from strong cultures of retail investing.”