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Background the FCA client classification Requirements

This Practice Note provides an overview of how a client is defined in chapter 3 of the Financial Conduct Authority’s Conduct of Business sourcebook (COBS), as well as the categorisation of such clients as retail clients, professional clients or eligible counterparties. The rules in COBS 3 are derived from the Markets in Financial Instruments Directive (Directive 2004/39/EC) (MiFID). MiFID was replaced by the recast MiFID (Directive 2014/65/EU) (MiFID II) and the EU Markets in Financial Instrument Regulation (Regulation (EU) 600/2014, OJ L 173, 12.6.2014) (EU MiFIR) (together the EU MiFID II framework). As amended, the majority of the EU MiFID II framework has applied since 3 January 2018, and EU Member States had until 3 July 2017 to transpose the provisions of MiFID II into national law. The MiFID II Directive contains provisions which amended the original client categorisation requirements under MiFID.

The FCA consulted its implementation approach to changes to the previous client categorisation regime introduced by MiFID II in consultation paper CP16/29: Markets in Financial Instruments Directive II Implementation—Consultation