The UK’s FCA has announced its “planning to review its client categorization rules to unlock more opportunities for wealthy investors and support capital markets, driving economic growth.”

The reform is part of the 50 initiatives the watchdog plans to complete by the end of the year aimed at boosting investment and economic growth.

“Reviewing the rules will ensure that expectations remain proportionate when dealing with wealthy or very experienced investors,” the watchdog said in a press release. “This will give confidence to firms and support investment in capital markets, boosting the competitiveness of financial services,” the press release adds.

The announcement follows a recent letter from the International Chamber of Commerce (ICC) to the FCA and the PRA, calling on the two UK regulators to introduce smarter and more agile regulation.

The letter, drafted by the ICC’s UK Secretary General Chris Southworth and seen by the Financial Times, criticized an “antiquated” regulatory framework in the UK, which it says means the country cannot benefit from digitizing and modernizing operations around exports. “These gains are negated by an antiquated regulatory framework that remains bureaucratic and inefficient, with laborious compliance checks and overburdensome capital requirements,” Southworth was quoted as saying.

But both the FCA and the PRA have dismissed the criticism, insisting that they have already taken steps to reduce the regulatory burden on banks and smaller businesses.

Greater clarity

According to the FCA’s Conduct of Business Sourcebook (COBS 3) there are three main categories of clients which the regulator supervises and deals with. These include (1) retail clients, (2) professional clients and (3) eligible counterparty.

The professional and eligible counterparty clients are further divided into:

• Elective Professional clients.
• Per Se Professional clients. 
• Elective Eligible Counterparties.
• Per Se Eligible Counterparties.

They differ from each other in the way the FCA supervises them and the extent to which the watchdog’s regulatory protection rules apply to each one.

According to the FCA, modernizing the above categories will “provide greater clarity about the rules and protections applying to different customer groups, particularly for wholesale firms.”

Nikhil Rathi, chief executive of the FCA said: “We want to rebalance risk to support growth and competitiveness, which is at the heart of our strategy.”

The watchdog hopes that the reforms will support a ‘bolder risk appetite’ among firms and investors, make it easier for firms to raise capital reimagine financial advice and guidance.

The FCA says it has already completed a number of initiatives to support the government’s growth agenda. These include reforms around more flexible regulation, unlocking investment, accelerating innovation, and helping firms set up and grow promoting the UK as a reliable and stable financial market.

UK financial regulators are facing constant pressure from the government, parliament as well as the business lobby to do more to support growth.