FCA consults on three structural changes to Consumer Duty

Cresthaven Analytics Intelligence Brief

Headline

FCA consults on three structural changes to Consumer Duty scope, narrowing wholesale and territorial application

Executive Summary

The FCA published a consultation on June 29, 2026 proposing three substantive amendments to the Consumer Duty regime. The proposals clarify wholesale activity boundaries, restructure accountability across distribution chains, and narrow territorial scope for non-UK customer business.

Bottom Line

The consultation places three concrete scope reductions on the table: a wholesale activity carve-out covering market making, custody, and safeguarding; a restructured accountability model that eliminates duplicative chain obligations; and a territorial exclusion for non-UK customer business that the FCA acknowledges removes material revenue from scope at investment banks. Retail-facing obligations are unaffected. A second consultation on retail-versus-professional client classification is confirmed for later in 2026, meaning the structural boundary of the Duty remains open across two active proceedings.

Key Regulatory Signals

Wholesale Activity Boundaries Redrawn: The FCA proposes explicit carve-outs for market making, custody, and safeguarding, confirming these activities do not normally fall within the Duty. Firms that do not genuinely shape consumer outcomes carry no Consumer Duty obligation under the proposed text.
Distribution Chain Accountability Restructured: Under the proposed framework, each firm is responsible for its own activities and may rely on counterparties to meet their respective obligations, provided it acts in good faith and responds to clear signs of harm. Duplicative compliance obligations across multi-firm chains are removed.
Territorial Scope Narrowed for Non-UK Business: Business conducted for genuinely non-UK customers falls outside the Duty under the proposals. The FCA states this removes a significant proportion of relevant revenues from scope for many investment banks operating cross-border.
Client Classification Consultation Signalled for Later in 2026: The FCA confirms a separate forthcoming consultation on client classification, targeting the boundary between retail and professional markets. Firms managing mixed client books face a second round of structural scope assessment before year-end.
Retail Consumer Protections Unchanged: The FCA frames these changes as a refinement, not a retreat. Obligations covering the manufacture and distribution of products for retail customers remain in force, and the FCA states the regime's consumer-outcome objectives are unaltered.

Regulatory Delta

- The Consumer Duty, introduced in 2023, has not previously been subject to formal consultation on structural scope reduction. This marks the first substantive rollback of its wholesale application.

- The territorial narrowing is a structural departure. Rather than clarifying how the Duty applies to cross-border non-UK revenue streams, the proposals remove them from scope entirely.

- The proposals align with the FCA's broader wholesale market reform programme, including simplified listing rules and consolidated tape initiatives. This signals a coordinated regulatory posture favouring outcomes over prescription in professional markets.

Materiality Classification

HIGH — A formal FCA consultation proposing structural scope reductions to the Consumer Duty requires wholesale firms, investment banks, and multi-firm distribution chains to reassess their existing Consumer Duty frameworks, compliance perimeters, and territorial mapping against the proposed text.

Intelligence Outlook

Monitor the FCA for the consultation paper closing date, the policy statement responding to this consultation, and the separate client classification consultation expected later in 2026.