On 12 January 2026, the Financial Conduct Authority (FCA) published a new webpage, outlining its findings in relation to its assessment of how firms of different sizes and business models evaluate complex exchange traded products (ETPs), communicate key risks and monitor outcomes under the Consumer Duty.
Background
In July 2025, the FCA launched a multi-firm review into the distribution of complex ETPs such as those using leveraged and inverse positions, which reset daily. This was with the aim to assess whether distributors offering these products on an execution-only basis were meeting Consumer Duty obligations.
The findings
- Good practice
- Products and services – some firms clearly defined the target markets for each product offered, as well as using both manufacturer and firm-level data to further refine their target market, conducting regular reviews of the target market and distribution arrangements.
Approximately 70% of consumers from the firms reviewed passed appropriateness tests first time. A small number of firms used product-specific tests for complex ETPs. This allowed firms to assess consumer knowledge and experience of the features and risks unique to complex ETPs. Most firms did not allow consumers to trade complex ETPs until they passed this test, ensuring that risks were effectively conveyed. - Price and value – some firms were able to clearly provide detailed assessments and regular reviews of whether the complex ETPs they distribute provide fair value.
- Consumer understanding – clear, plain language risk warnings, supported by in-app pop-ups, alerts and educational materials at key points in the consumer journey to engage and educate consumers, with regular testing to ensure communications remain effective. Some firms adopted proactive ‘check-ins’ for consumers holding complex ETPs beyond recommended holding periods, which may prompt consumers to review their holdings and revisit educational materials.
- Outcomes monitoring – regular analysis of management information and key performance indicators to assess consumer outcomes including complaints, holding periods and trading patterns. Firms adopting proactive contact with consumers holding leveraged ETPs for longer periods can help to understand the reasons and mitigate poor outcomes, as well as offering additional support to vulnerable consumers.
- Products and services – some firms clearly defined the target markets for each product offered, as well as using both manufacturer and firm-level data to further refine their target market, conducting regular reviews of the target market and distribution arrangements.
- Areas for improvement
- Products and services – many firms were reliant on the manufacturer’s target market, sometimes defining their target market as simply ‘retail consumers’ without considering product complexity or consumer vulnerability. In addition, in some cases the firms were not reviewing their processes regularly, meaning that it was difficult to identify and prevent distribution to consumers outside of the intended target market.
Most firms used generic tests that did not cover ETP-specific risks, meaning that it is difficult to gauge whether consumers have appropriate knowledge and understanding. Half of the firms reviewed also adopted a yes/no style of assessment, enabling consumers to self-declare their understanding, rather than be accurately assessed. - Price and value – in many cases, the firms’ fair value assessments lacked detail, focusing on their service fees as a distributor without assessing the impact of product costs. The FCA also raised concerns over the consistency of firms considering manufacturers’ assessments as part of their analysis of fair value.
- Consumer understanding – the FCA found that consumer information was not appropriately tested for readability or understanding, and firms often relied on consumers reviewing the manufacturer Key Information Documents to understand how charges would impact their investment.
Few firms highlighted the risks of holding leveraged/inverse ETPs beyond the recommended holding period (typically 1 trading day), which could expose consumers to tracking errors due to the impact of daily price resets. The FCA noted that this finding was compounded by some firms’ lack of active monitoring of holding periods. - Outcomes monitoring – most firms only monitored outcomes at a service level, with little focus on complex ETPs, with few demonstrating that processes were in place to take appropriate action when they identified potential for poor outcomes. The FCA also noted issues relating to identifying vulnerable consumers, with many relying on self-declaration in order to do so.
- Products and services – many firms were reliant on the manufacturer’s target market, sometimes defining their target market as simply ‘retail consumers’ without considering product complexity or consumer vulnerability. In addition, in some cases the firms were not reviewing their processes regularly, meaning that it was difficult to identify and prevent distribution to consumers outside of the intended target market.
Next steps
The FCA highlighted that its findings from this review had informed its ongoing policy work in relation to retail investing and encouraged firms to engage with Discussion Paper 25/3, on expanding consumer access to investments. The discussion paper closes to comments on 6 March 2026.