Sturgeon Stories: Capital Markets in the UK to Overhaul Client Classifications

1. Current UK Client Classifications

Sub-category	Criteria	Access & Protections
Certified High Net Worth	£100K+ income or £250K+ net assets (excl. property/pension); signed COBS Annex 2R declaration	Access to non-mainstream pooled investments; loses retail-level protections
Certified Sophisticated	Firm-issued certificate (last ≤36 months) + signed COBS Annex 3R	Access to high-risk products
Self‑Certified Sophisticated	Meet ≥1 criteria (e.g. VC/private equity professions; ≥2 unlisted co. investments; director of entity >£1 m turnover; angel investor network) + signed Annex 4R	Same access
Restricted Investor	Those who haven’t invested—or will not—in >10% of net assets in unlisted securities

The FCA aims to simplify categories, cut complexity, and facilitate capital market investment

Reclassify investment types into three clearer buckets:
- Readily Realisable Securities (RRS): Listed stocks/bonds, freely marketed to all
- Restricted Mass Market Investments (RMMI): Include unlisted securities, P2P, qualifying crypto assets. Retail marketing allowed only to certified HNW/sophisticated/restricted clients, with extra safeguards
- Non-Mass Market Investments (NMMI): Hedge funds, speculative illiquid securities—no marketing to general retail; only to certified types under suitability tests
Strengthened safeguards for RMMI & NMMI:
- Mandatory risk warning:
- “Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment…”

Ban inducements: No cashbacks, bonuses, gifts in promotions
Positive friction tools: personalised warnings, “take 2 mins to learn more” links, 24-hour cooling-off
Tightened client categorisation:
- Adds evidence declaration, simplified language, “none of the above” option
- Firms must hold reasonable belief and evidence (income/assets numbers)
- Limits on repeated self-certification – adds friction.
Stricter appropriateness and suitability:
- All RMMI needs appropriateness checks; NMMI needs suitability assessment
- Approvers need quarterly attestations and ongoing responsibilities .
Wider reforms: Also cutting prospectus rules, data burdens, and legal text overall by ~70%

Finally, a consultation on elective professional clients is expected later in 2025

Simpler investment categories (RRS, RMMI, NMMI) will replace “non-mainstream”, “speculative” etc.
Investor status stays, but is more rigorously verified and documented.
Extra consumer protections are added for high-risk promotions.
The goal: reduce complexity, better investor clarity, broaden access to capital markets—particularly for HNW and sophisticated individuals.