On 20 October 2025, the Financial Conduct Authority (FCA) published high level observations from its multi-firm review into corporate finance firms’ compliance with COBS 3 client categorisation rules and COBS 4 certification requirements.

Background

The FCA explained that in September 2023 it set out plans to look at how corporate finance firms apply the client categorisation rules and has conducted this review to see whether there are current practices that may pose a risk to consumers.

In addition, the FCA made clear that it plans to update the COBS 3 client categorisation rules for all firms in scope and will shortly consult on these proposals, as part of addressing feedback to the discussion chapter in CP24/24 about modernising these rules on client categorisation.

Key findings

The FCA set out several areas for improvement, including:

• Categorising clients: The FCA found that while most firms appear to conduct a client categorisation assessment some did not document this or keep supporting records or they conducted a superficial assessment or used invalid criteria (for example in relation to categorisation as professional clients), which may mean that such firms are failing to meet requirements. The FCA set out that good practice would be to document and record the assessment against the applicable criteria, have this reviewed by compliance and then saved with supporting documents.
• Categorising corporate finance contacts:  The FCA also highlighted thatmost firms treated potential investors as contacts and appeared to conduct some assessment of their client category for the purpose of communicating financial promotions to them, but the assessment process was not always clear or rigorous. The FCA set out that firms should be reviewing and updating the list of contacts periodically and before a financial promotion is communicated and, further, should be re-categorising a contact that no longer meets the initial criteria or receives promotions in a new capacity.
• Certifying retail investors as high net worth or sophisticated: The FCA explained that it found thatmost firms had some process to decide investor certification, but that there were gaps in these processes and, further, that some firms had no clear process. The FCA set out that good practice would be for firms to identify the financial promotion rules relied on, have a clear process for establishing the basis for certification and then review this annually.
• Policies and procedures: The FCA did set out that most firms had relevant policies and procedures although they were not always tailored to the firm’s business and many were incomplete, but that good practice would be identifying all of the relevant rules and applying them to each business line.