The Financial Conduct Authority has proposed narrowing the Consumer Duty for wholesale markets by removing business with non-UK customers from scope and clarifying how firms should apply the regime across complex distribution chains.
The FCA opened consultation CP26/23 on 29 June 2026 after concerns that the Consumer Duty, which came into force in 2023, has been applied more widely and more intensively than intended in wholesale markets.
The proposals would remove business with non-UK customers from the Duty’s scope, make clearer where the Duty applies, clarify when firms can rely on each other in distribution chains, and explain the interaction between the Duty and other product governance rules.
The consultation closes on 18 September 2026, with the FCA expecting to publish a policy statement and make any new rules in Q1 2027.
The change is aimed at regulated firms subject to the Duty, especially those operating early in the distribution chain, manufacturing retail products or services with other firms, forming part of complex distribution arrangements, or conducting retail business for customers outside the UK.
Simon Walls, executive director of markets at the FCA, said the Consumer Duty was created to improve retail consumer outcomes and was not intended to become a wholesale duty for transactions between sophisticated parties.
The FCA has also published CP26/22 on simplifying insurance rules, which runs alongside the Consumer Duty proposals and closes on 4 September 2026.
That consultation proposes changes to the territorial application of the Insurance Conduct of Business Sourcebook and the Product Intervention and Governance Sourcebook chapter 4, with detailed insurance conduct requirements applying where there is a clear UK connection. It also refers to high-level protections under the Principles for Businesses and the Senior Manager Arrangements, Systems and Controls sourcebook.
For solicitors, barristers and in-house counsel, the professional issue is no longer simply whether a firm is regulated by the FCA, but where its role sits in the product chain and whether a UK retail customer is realistically affected. Lawyers advising wholesale banks, insurers, intermediaries, Lloyd’s market participants, Gibraltar-based firms and temporary permission firms will need to revisit Consumer Duty scoping papers, product governance records, cross-border client classifications and contractual reliance provisions.
The wider legal sector context is a regulator trying to reduce unnecessary compliance cost without weakening retail consumer protection. The practical implication for law firms is that Consumer Duty advice should now be more territorial, more evidence-led and more closely tied to client status, distribution structure and product design than to broad assumptions about FCA-regulated business.