The UK’s FCA has published the findings of a multifirm review examining how firms distribute Complex exchange traded products (complex ETPs) to retail consumers, and how they are meeting their obligations under the Consumer Duty. Complex ETPs are a growing segment of the investment market. They include products with leveraged, inverse or dailyreset strategies that can generate significant risk and potential volatility for investors, particularly when held beyond typical holding periods.
Background
In July 2025, the FCA launched a review of how platforms and wealth managers distribute complex ETPs on an executiononly basis to retail clients. The aim was to assess whether firms are:
- Meeting Consumer Duty expectations;
- Effective in their product governance and distribution;
- Supporting consumer understanding of risks; and
- Actively monitoring outcomes for investors.
The review reflects the FCA’s broader objective to promote responsible retail investment markets and help consumers make timely, informed investment decisions.
Key Findings: Good Practice and Areas for Improvement
The FCA’s review focused on four core areas: Products and Services, Appropriateness Testing, Price and Value, and Consumer Understanding.
- ProductsandServices – Target Market and Distribution
Good Practice: Firms defined target markets using clear characteristics (e.g., risk tolerance, experience) and reviewed them regularly.
Improvement Needed: Over-reliance on generic manufacturer definitions and weak distribution controls.
Expectation: Firms must define, monitor, and evidence granular target markets for complex ETPs to ensure products reach appropriate consumers.
- Appropriateness Testing
Good Practice: Some firms use product-specific tests with scenario questions and educational support for failures.
Improvement Needed: Many firms rely on generic tests, report very high pass rates, and poorly assess product-specific risks.
Expectation: Implement robust, product-specific tests aligned with Consumer Duty principles.
- Price and Value
Good Practice: The FCA found no examples of firms effectively assessing price and value. Most assessments focused narrowly on fees, ignoring product costs, structural risks, and distribution impacts.
Improvement Needed: Firms need to broaden their focus to consider all relevant costs, structural risks, and the impact of distribution channels.
Expectation: Conduct comprehensive price and value assessments to ensure fair value for retail investors, documenting processes and outcomes.
- Consumer Understanding
Good Practice: Plain-language warnings, in-app prompts, and proactive follow-ups.
Improvement Needed: Over-reliance on manufacturer materials, lack of tailored risk and cost communication.
Expectation: Provide clear, tailored, and timely information enabling informed investment decisions.
- Outcomes Monitoring and Consumer Support
Good Practice: Use of MI/KPIs to track trading patterns and proactive client contact.
Improvement Needed: Limited product-specific monitoring and poor identification of vulnerable consumers.
Expectation: Implement active, product-specific outcomes monitoring and intervene where harm may occur.
Next Steps
The FCA expects firms to take proactive steps when distributing complex ETPs, including reviewing target markets and distribution controls to ensure products reach appropriate consumers, enhancing product-specific appropriateness testing, assessing all costs and risks to confirm fair value, providing clear and tailored communications to support informed decisions, and strengthening outcomes monitoring to identify and mitigate harm. Firms should embed these practices into governance, oversight, and reporting frameworks to demonstrate compliance, accountability, and effective investor protection. You can also expect the FCA to consult on future measures through its Discussion Paper DP25/3, providing an opportunity for firms to engage and help shape emerging regulatory expectations.
How Complyport Can Help?
At Complyport, we help firms navigate evolving regulatory and reporting requirements, translating complex expectations into practical, actionable solutions. Our support ensures organisations are prepared, accountable, and aligned with supervisory expectations.
- Regulatory Engagement and Supervisory Readiness:We help firms prepare board briefings, regulatory submissions, and responses to supervisory engagement exercises. This includes participation in consultations and calls for input, enabling firms todemonstrate proactive risk management and strategic alignment with regulatory priorities.
- Governance and Accountability Frameworks:Weassist in clarifying roles and responsibilities across senior management, strengthening oversight arrangements, and ensuring that key decisions and challenge processes are well-documented and auditable.
- Risk Assessments and Compliance Frameworks:We conduct gap analyses to assess current practices against regulatory requirements,identifying conduct, operational, and oversight risks. We then support firms in implementing proportionate governance structures, controls, and documentation to evidence accountability and drive good customer outcomes.
Contact Us
To understand how the FCA’s Review may affect your business, arrange a meeting with one of our compliance experts.
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