Our Investments and Payment Services team looks at the FCA’s new action plan to refine the Consumer Duty, outlining what it means for wholesale firms and how it could reshape regulatory expectations across the market.
On 29 September 2025, the FCA issued a letter to the Chancellor, addressing concerns raised around how the Consumer Duty applies to firms primarily engaged in wholesale activities.
The FCA acknowledged that that wholesale market activities largely sit outside the scope of Consumer Duty, whilst highlighting the positive impact the Duty has already delivered including, but not limited to, improved firm conduct and boosting consumer confidence. In response, they have now proposed an action plan of rebalancing expectations and offering clearer guidance.
The intention is to ensure firms can meet their regulatory obligations in a proportionate way, without compromising the Duty’s core principle of protecting consumers.
Below, the Thistle Initiatives team explores what this means for wholesale firms, the wider market, and what steps firms should consider next.
What does this letter mean for wholesale firms?
The FCA has clarified how investment activity influences the scope of the Consumer Duty. The regulator reaffirmed that while wholesale activity generally falls outside the Duty’s scope, certain functions that directly affect retail outcomes are still captured. For example, wholesale firms that manufacture products or services intended for retail distribution are expected to meet the Duty’s standard to help safeguard consumer outcomes.
The letter also outlined existing measures already in place aimed at reducing unnecessary friction in capital markets. Activities such as issuing simple bonds, listed equities (where issuers are already subject to ongoing disclosure obligations) and high-value investment products have been excluded, reflecting their limited impact on retail customer outcomes.
At the same time, the FCA has highlighted one of the key priorities in its five-year strategy to support growth. Building consumer confidence in investment products is viewed as essential to unlocking this growth, and the Duty is tailored to apply proportionately in situations where wholesale investment activity affects retail markets and consumers.
The FCA also pointed to previous instances of consumer harm from poorly designed or inappropriately distributed products, such as structured products sold outside their intended target market, to underline the importance of accountability for firms whose decisions have downstream effects on retail investors.
How does this apply to the wider market?
There are several key takeaways in the approach that the letter outlines which are useful for the wider market to be aware of:
- Proportionate approach in the distribution chain: As part of the action plan, the FCA recognises the need to refine its supervisory approach to firms collaborating to manufacture products for retail customers. This will provide clearer boundaries of responsibility between firms, helping to reduce regulatory overlap and compliance burdens.
- Proportionate approach in client protection: Though this remains as part of a mixture of planned proposals and consultations, the FCA also intends to revisit current client categorisation frameworks and may consider revising the thresholds for individuals to receive retail protections. Firms should focus on aligning their Consumer Duty frameworks to their specific client base, ensuring compliance processes remain efficient without extending beyond the Duty’s intended remit.
What are the next steps?
The FCA set out a clear action plan to respond to wholesale firms’ concerns, with the focus on reducing compliance burdens, providing clarity, and ensuring proportionality in applying the Consumer Duty.
Immediate actions (2025)
- The FCA will provide clearer guidance on its supervisory expectations, particularly where firms collaborate to manufacture products for retail customers. For wholesale firms, this means less duplication of compliance efforts and fewer administrative costs, but with continued responsibility where products are ultimately designed for retail distribution.
- The FCA will also consult on updating the client categorisation framework. Recognising that some investors have the experience, knowledge, or resources to operate without full retail protections – the FCA is currently exploring clearer standards for identifying professional clients. For wholesale firms, this could potentially mean expanding the target market for non-retail products they manufacture to include sophisticated investors excluded from full retail protections leading to a potential for increased activity in some market.
Medium-term actions (first half of 2026)
- The FCA will consult on refining how the Duty applies across distribution chains, with a focus on drawing clearer boundaries between business-to-business and retail activity. This includes clarifying when firms can rely on each other in product design and distribution.
- The FCA also proposes removing non-UK business from the scope of the Duty, acknowledging the complexity and cost of aligning UK rules with overseas regimes. For wholesale firms with clients from varying jurisdictions, this could significantly reduce duplicated compliance costs and ease jurisdictional conflicts. Any such change would be carefully assessed to avoid unintended impacts on UK expatriates or other retail consumers.
Ultimately, there is a need for continued engagement between firms and the FCA in this period of change for Consumer Duty regulation, a purpose for which the upcoming proposals and consultations will serve. This is also a call to action for firms to evaluate the appropriateness of internal compliance processes in proportionality to the Consumer Duty, as well as implementing firmwide training to raise awareness of the Duty’s scope.
As Lucy Castledine, Director of Consumer Investments, stated on the Consumer Duty: it is built on "creating a market that works for everyone", a market focused on good consumer outcomes but still giving firms the flexibility to innovate.
How Thistle Initiatives Can Help
At Thistle Initiatives, we help firms stay ahead of regulatory change by strengthening their compliance frameworks. Whether you're looking to assess your current controls or prepare for the FCA’s proposed Consumer Duty action plan, we offer tailored support that’s practical, proportionate and effective.
If you’d like to discuss how we can support your firm in light of the new action plan, get in touch at info@thistleinitiatives.co.uk or call 020 7436 0630 to speak with our team.
Meet the Experts
Rohan Chakraborty, Senior Consultant 
Leveraging his experience as a risk advisory consultant providing regulatory and legal support for banks, PSPs and EMIs, Rohan joined Thistle Initiatives in 2023 as part of its Payment Services team.
He is excited to work alongside a talented team of payment experts to continue guiding clients in meeting their regulatory obligations.
Anisha Kalam, Senior Consultant
Anisha is a compliance specialist with over six years of experience in financial services, specialising in FCA regulations and OFSI sanctions. She has successfully implemented global compliance programs, introduced cost-saving monitoring systems, and ensured adherence to regulatory requirements.
Anisha's expertise spans sanctions analysis, regulatory risk mitigation, policy drafting, and compliance audits. With a proven track record in reducing compliance risks and managing high-stakes regulatory projects, she brings technical precision and leadership to every role.