FCA Clarifies Consumer Duty Application to Wholesale Firms Under the Mansion House Commitments

The Financial Conduct Authority (FCA) has issued a letter to the Chancellor of the Exchequer as part of the Mansion House commitment , outlining its next steps to ensure the Consumer Duty is applied proportionately across financial markets. The letter, dated 29 September 2025, confirms the FCA’s intention to refine how the Duty interacts with wholesale firms, following industry concerns about scope, cost and regulatory overlap.  

Current Application of the Duty 

The FCA reiterates that most wholesale activity remains outside the scope of the Consumer Duty, which applies only where firms’ activities can have a material impact on retail customers. Nevertheless, wholesale firms that manufacture or distribute products intended for retail clients are still captured by the Duty. 

The FCA acknowledges several challenges raised by market participants, including: 

• Ambiguity over whether the Duty applies where there is no direct retail relationship; 
• Concerns about disproportionate compliance costs for firms with limited retail exposure; 
• Unclear responsibilities within distribution chains, particularly between product manufacturers and distributors; and 
• Difficulties reconciling the Duty with non-UK business operations and overlapping regulatory regimes. 

The FCA’s Four-Point Action Plan 

To address these concerns, the FCA has committed to the following actions: 

1. Provide Clarity on Supervisory Expectations
   The FCA will issue further guidance outlining how the Consumer Duty applies to manufacture-distribute models involving multiple firms contributing to retail outcomes. The aim is to reduce duplication and provide clarity around regulatory expectations. 
2. Consult on Client Categorisation Framework
   A consultation will be launched to examine how investor categorisation can better reflect investor sophistication and financial capacity. This may include updating the definitions of professional clients and revising high-net-worth thresholds. Legislative updates, such as amendments to the Financial Promotion Order, may also follow to support these changes. 
3. Consult on Scope and Exemptions (First Half of 2026)
   The FCA plans to consult on where the Duty should and should not apply, including reviewing existing distribution chain responsibilities and considering new exemptions for business-to-business activity. 
4. Propose Exclusion for Non-UK Customers
   Recognising the complexity of cross-border operations, the FCA proposes excluding business with non-UK customers from the Duty’s scope, subject to assessing any consumer protection implications, particularly for UK expatriates. 

Strategic Alignment and Wider Objectives 

The FCA underscores its commitment to preserving the UK’s position as a competitive global financial centre. It aims to balance strong consumer protection with regulatory proportionality, supporting innovation and growth without imposing unnecessary regulatory burdens. 

The letter also calls for closer alignment with Government and Parliament in defining regulatory outcomes, including a more transparent articulation of acceptable risk levels and market confidence thresholds. 

What Firms Should Consider 

Wholesale firms should begin reviewing their business models and relationships considering these developments. Key considerations include: 

• Assess Scope Exposure: Determine whether any activities, such as product design or retail distribution, could bring parts of the business within scope of the Duty. 
• Prepare for Consultations: Engage with upcoming FCA consultations on client categorisation and Duty scope in early 2026. 
• Governance and Oversight: Ensure that senior management understands where accountability lies, particularly in shared or delegated arrangements. 
• Cross-Border Business: Monitor how the proposed exclusion for non-UK customers could affect overseas operations or group structures. 
• Proportional Implementation: Align compliance frameworks to the spirit and scale of the Duty without over-engineering controls in purely wholesale contexts. 

How Complyport Can Help 

Complyport can assist firms in understanding and adapting to the FCA’s evolving expectations under the Consumer Duty, particularly in light of the Mansion House commitments. Our tailored services include: 

1. Consumer Duty Impact Assessment: We help identify whether and how the Consumer Duty applies to your business model. 
2. Regulatory Interpretation and Strategy: Our consultants provide expert interpretation of the FCA’s evolving guidance, including implications of the proposed changes to client categorisation and exemptions for non-UK business. 
3. Governance and Oversight Frameworks: We support the development and enhancement of governance structures to ensure clarity around roles, responsibilities and accountability, particularly in complex or delegated arrangements. 
4. Cross-Border Compliance Advisory: Complyport advises on the regulatory implications of proposed exclusions for non-UK clients, supporting firms with international operations in managing cross-jurisdictional risk. 

Contact Us 

To understand how these developments may impact your business and discuss your compliance needs, contact Complyport today to speak with one of our Subject Matter Experts. 

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