We helped many of our clients with the FCA’s client categorisation and certified investor return. Although submission of this return was voluntary, it indicates the regulator remains focused on this area. As a reminder, the FCA published its consultation on client categorisation rules (CP25/36) in December 2025; read our thought piece here. We await publication of the final rules in the policy statement.
In this context, we expect continued supervisory focus in the form of additional surveys and formal requests from the regulator. Firms should be confident their systems and controls are sufficiently robust, and that appropriate categorisation decisions can be evidenced across their product lines. This is an area that requires careful consideration of several overlapping obligations: the Consumer Duty, the High-Risk Financial Promotion Rules, and the Consumer Composite Investments regime, so it’s vital that firms have mapped the rules to their activities and got this right first time.
KEY QUESTIONS FIRMS SHOULD ASK THEMSELVES INCLUDE:
- Have all relevant rules been considered in the design of the firm’s systems and controls across its product range?
- Have products been categorised correctly under the financial promotion rules?
- Has the firm correctly understood which investor types it is permitted to work with, taking into account its Part IV permissions?
- Is the investor onboarding journey clearly documented? Has the timing of risk warnings, categorisation decisions and key disclosures been correctly applied?
- Are good outcomes for investors central to the firm’s approach?
- Have the firm’s policies been consistently applied, particularly where the approach may have changed over time?
- What management information is produced, and is it subject to challenge?
- What sample checks and outcomes testing are conducted?
- Have front office teams received appropriate training on the firm’s policies and procedures?
We’ve provided firms with the assurance they need; here’s a case study.
CASE STUDY.
A private markets investment manager approached Cosegic after receiving a Section 165 request from the FCA concerning its client categorisation systems and controls. Here’s how we helped.
- They received a Section 165 request from the FCA concerning their client categorisation systems and controls.
- As enquiries proceeded, the regulator raised concerns including: the firm’s understanding of how its products were categorised under the financial promotion rules, the application of the Consumer Duty to its activities, and how the firm had applied the appropriateness test to its investor base.
Our gap analysis and remediation exercise included:
- Establishing the correct classification of the firm’s products under the financial promotion rules.
- Revising the investor onboarding journey and appropriateness tests.
- Reviewing and reassessing client categorisations.
- Updating onboarding procedures, including elective professional client opt-up processes.
- Benchmarking the firm’s approach against its peer group.
We supported the firm with its communications to the regulator every step of the way.
THE RESULT WAS:
Swift resolution of the FCA’s Section 165 request without further escalation.
A client confident that their controls are compliant.
HOW COSEGIC CAN HELP?
At Cosegic, we don’t just meet the rules; we rule them. From health checks to training, authorisations to secondments, our team gives firms the confidence to face regulatory scrutiny head-on, not scramble to react to it. If you’d like to stress-test your client categorisation framework,or want to talk through where the FCA’s trajectory in this area is heading, get in touch; we’ll help you stay ahead of it.
