The Financial Conduct Authority (FCA), the UK’s financial regulatory body, is considering scaling back certain regulatory requirements in a bid to reduce the financial burden on product providers and support economic growth. Among the proposed changes is the removal of the Consumer Duty Board Champion requirement and potential delays to new consumer protection rules where existing regulations are deemed sufficient.
The proposed changes were disclosed in a letter from the FCA’s Chief Executive, Nikhil Rathi, to key government officials, including the UK Prime Minister, Chancellor, and Secretary of State. This letter, which was made public in January 2025, outlines the FCA’s intent to reduce bureaucratic hurdles while maintaining effective oversight of financial firms.
Consumer Duty: A Costly Obligation for CFD and Spread Betting Firms
The Consumer Duty rules, introduced in July 2023, were designed to raise the standard of consumer protection across financial services. These regulations imposed strict obligations on firms, including ensuring fair treatment of customers, transparent communication, and offering products that provide genuine consumer benefits.
However, the implementation of these rules has come at a significant cost. According to Reuters, firms collectively spent an estimated £2.4 billion ($3.1 billion) in one-time costs to comply with the new regulatory framework, along with substantial ongoing operational expenses.
For product providers, particularly forex, contracts for differences (CFD) brokers, and spread betting firms, the rules have added another layer of complexity. The FCA has historically maintained one of the most stringent licensing processes globally, and following Brexit, firms can no longer passport their licenses across the European Economic Area (EEA). This has resulted in many brokers reconsidering their presence in the UK market.
In fact, recent data revealed that none of the 100 EU-based CFD brokers that operated in the UK under temporary permissions after Brexit pursued permanent FCA authorization. This suggests that the costs and regulatory requirements have discouraged firms from establishing a long-term presence in the UK.
FCA’s Regulatory Shake-Up: What It Means for CFD and Spread Betting Firms
FCA’s Strategic Shift: Prioritizing Economic Growth
Recognizing the financial strain on product providers, the FCA is now starting to shift its focus towards promoting economic growth and market competitiveness. In its letter, the regulator acknowledged the need to reduce compliance costs, stating:
“We could go even further and, with Government support, reduce costs of anti-money laundering measures, relaxing know-your-customer requirements on small transactions.”
An FCA spokesperson emphasised that their primary focus up till 2030 will center on fostering growth while maintaining appropriate consumer protections. The regulator has commissioned academic research to explore the relationship between financial regulation and economic expansion, ensuring that any changes are backed by data and analysis.
Potential Implications for CFD and Spread Betting Firms
The FCA’s proposed regulatory relaxation could have both positive and negative implications for firms and consumers alike:
Positive Impacts:
- Lower Compliance Costs – Brokers would benefit from reduced regulatory overheads, allowing them to allocate resources more effectively.
- More Competitive Financial Market – Loosening some restrictions could make the UK a more attractive hub for financial services post-Brexit.
- Encouraging New Entrants – A reduction in bureaucracy could incentivize new brokers and financial institutions to enter the market, fostering innovation and competition.
Potential Risks:
- Consumer Protection Concerns – Loosening rules may lead to weaker oversight, increasing the risk of mis-selling, fraud, or unfair treatment of customers.
- Reputational Risks for the UK Market – If perceived as too lax, the UK’s financial regulatory framework could lose credibility on the global stage.
- Uncertainty for Firms – A sudden shift in regulatory direction might create uncertainty for businesses that have already invested heavily in compliance.
A Broader Trend Toward Deregulation?
The FCA’s move reflects a broader trend in the UK government’s post-Brexit strategy. In an effort to enhance the UK’s status as a global financial center, regulators are exploring ways to balance consumer protection with industry growth. The recent easing of capital requirements for small banks, the push for crypto-friendly regulations, and now the potential relaxation of Consumer Duty rules all point toward a more business-friendly regulatory environment.
What’s Next?
The FCA has indicated that it will conduct a wider consultation on these proposals before implementing any major regulatory changes. Input from industry stakeholders, consumer advocacy groups, and government bodies will play a key role in shaping the final policy decisions.
In the coming months, businesses should keep a close eye on FCA announcements and prepare for potential shifts in compliance requirements. For CFD and spread betting firms, these changes could open the door for greater operational flexibility, while also requiring firms to reassess their strategies in an evolving regulatory landscape.
Conclusion
The FCA’s reconsideration of Consumer Duty obligations and broader regulatory burdens marks a significant shift in the UK’s financial regulatory framework. As the UK government prioritizes economic growth, the financial sector may benefit from reduced compliance costs and increased competitiveness. However, the challenge will be ensuring that consumer protections remain robust while fostering a thriving, well-regulated financial market.
As discussions unfold, brokers, investors, and consumers alike will be watching closely to see how these proposed changes will shape the future of the UK’s financial industry.
