In December 2025 the FCA said it would publish final rules on client categorisation in a policy statement during 2026. With two months of the year left, none has appeared. On 4 November 2026 the regulator's page for CP25/36, last updated on 18 February 2026, still says a policy statement will follow once responses are reviewed. Until it does, every UK adviser who treats a client as an elective professional client works under the current rules in COBS 3.5.
The current rules allow the label only after a documented assessment of the client, the client's written request and a written warning the client acknowledges. CP25/36 proposes to drop one of those tests, add a route for very wealthy clients and require firms to review every existing elective professional client within a year of new rules. The sensible course is to tighten files now and treat the changes as proposals. The label matters most for products such as private US real estate, whose promotion the FCA restricts. The guide to US commercial real estate for advisors explains how such deals are structured.
What the elective professional client rules require today
COBS 3.5.3R sets three conditions, which the consultation paper reproduces in its proposed rule text. The first is the qualitative test. The firm must assess the client's expertise, experience and knowledge and gain reasonable assurance that the client can make their own investment decisions and understand the risks involved.
The second is the quantitative test, which applies to MiFID or equivalent third country business. The client must meet two of three criteria. One is transactions of significant size averaging ten per quarter over the previous four quarters. Another is a portfolio of cash and financial instruments above EUR 500,000, about USD 558,000 at the Federal Reserve's rate for 30 October 2026. The last is at least one year in a professional position in the financial sector that requires knowledge of the services envisaged.
The third is a procedure. The client must state in writing that they wish to be treated as a professional client, either generally or for a particular service, transaction or product. The firm must give a clear written warning of the protections and investor compensation rights the client may lose, and the client must confirm in a separate document that they understand the consequences. A firm must also let any professional client ask for more protection.
Why the label matters for unlisted US shares
The FCA restricts how some investments are promoted to clients outside the professional categories. In its policy statement PS22/10 of August 2022, it described non-readily realisable securities as, broadly, unlisted securities such as shares or bonds that are not admitted to trading. Shares in an unlisted US corporation appear to fit that description. Under the rules that followed, a firm making a direct offer of such investments to clients without professional status must meet four conditions. They are a 24-hour cooling off period, a personalised risk warning, an appropriateness assessment and a check that the client holds a current investor statement.
The high net worth investor statement belongs to this regime. A client certified as a high net worth investor, or as a sophisticated or restricted investor, keeps the default protections and becomes eligible to receive the promotion. The statement must have been signed within the previous 12 months. Elective professional status removes those protections, including the Consumer Duty, as the consultation paper notes. The rules also exempt a firm that will itself apply the suitability rules to the investment, so an advised client can be considered for a private US deal without being opted up at all.
What CP25/36 proposes, and its status
The paper was published on 8 December 2025 and closed on 2 February 2026. It says the FCA's supervisory work shows the quantitative test "can be open to misuse", and it proposes two routes to elective professional status. One is a new wealth route for a client with investable assets of at least £10 million, about USD 13.4 million at the Federal Reserve's rate for 30 October 2026. Investable assets mean a portfolio of designated investments or cash, and the client would need no structured qualitative assessment. The other keeps the qualitative assessment but makes it more demanding, with a set of relevant factors a firm must consider, while the quantitative test would go except for local authorities.
Either route would need the client to request the categorisation and give informed consent, by signature, to giving up the default protections. Firms could tell a likely candidate about the option but could not incentivise, mislead or pressure them. The categorisation would also have to fit the firm's duty to act in the client's best interests and the Consumer Duty. The proposed text also suggests reassessing a client after two years without contact, and requires re-categorising within five days of a client withdrawing consent.
The transitional proposal reaches every existing file. Within one year of the new rules taking effect, firms would review all existing elective professional clients against them. The paper indicates that firms which relied only on the quantitative thresholds, or on the client's self-certification, are the ones likely to need new information. It adds that a ticked box "will not demonstrate informed consent". All of this remains proposal until the FCA publishes its policy statement, and the final rules may differ.
Elective professional client files to tighten before the FCA decides
The work that holds under any outcome is a review of the file. For each client already treated as an elective professional client, the adviser should check that the assessment records the client's actual knowledge and experience, not just the numbers. The written request, the warning and the separate statement should all be present and dated. The file should also show that the client understood what was given up, and when the adviser last dealt with the client.
The adviser should then ask whether opting up is needed at all, given the suitability route. For a client already opted up, the categorisation should be confirmed again before any private US offering is discussed. The US side runs separately. Regulation S, the SEC exemption for offerings made outside the US, has its own conditions, and meeting them does not satisfy any FCA requirement. Where a client wants US property exposure without opting up, listed REITs are another route, and the comparison of REITs and private real estate sets out how the two differ.
Opting up removes protections but leaves the investment's own risks in place. Capital can be lost, property values can fall, tenants can leave and distributions may not be paid. Borrowing magnifies losses, the interest is illiquid and sterling movements change its value. Shares of a US corporation can also fall within US estate tax for an individual outside the US, as the guide to US estate tax for global investors explains.
Raveum offers US real estate to eligible investors outside the US under Regulation S. They invest through a US corporation, a blocker, that holds the property interest, and they typically receive Form 1042-S. Raveum handles KYC, agreements and US tax forms, while the adviser's FCA permissions and each client's categorisation remain the adviser's responsibility. Advisers can see how introductions work on Raveum's partner page.
The policy statement may confirm the £10 million route, change it or drop it. Both the current rules and the proposals rest the label on evidence and on consent the client understood. An adviser whose files show both should be ready for the final rules, while one whose files rest on a ticked box may face a full review. The guide to US commercial real estate for advisors covers the deal structure behind the UK paperwork.
Frequently Asked Questions
What is an elective professional client?
An elective professional client is a client who would otherwise receive the full default protections but has asked to be treated as professional. Under COBS 3.5.3R the firm must assess the client's expertise, experience and knowledge, apply a quantitative test for MiFID business, give a written warning and obtain the client's separate written confirmation.
What is the quantitative test for an elective professional client?
For MiFID or equivalent business, the client must meet two of three criteria. These are ten significant transactions a quarter over the previous four quarters, a portfolio of cash and financial instruments above EUR 500,000, and at least one year in a relevant professional role in the financial sector. CP25/36 proposes removing this test.
What is the difference between a per se and an elective professional client?
A per se professional client is treated as professional because of what it is, such as a regulated financial firm or a company meeting the size tests in COBS 3.5.2R. An elective professional client starts with the default protections and is opted up only after an assessment, a written request and a warning.
Is a high net worth investor statement the same as elective professional status?
No. A signed high net worth investor statement lets a firm send certain promotions of high-risk investments to a client who keeps the default protections. Elective professional status removes those protections, including the Consumer Duty. The statement must have been signed within the 12 months before the promotion.
Will existing elective professional clients be reassessed under CP25/36?
If the proposals become rules, yes. CP25/36 would require firms to review all existing elective professional clients against the new rules within one year of them taking effect. Firms that relied only on quantitative thresholds or self-certification may need new information. As of 4 November 2026 no policy statement has been published.
What risks does a client take on as an elective professional client?
The client gives up protections, including the Consumer Duty and the FCA's promotion restrictions on high-risk investments, and may be offered products closed to other clients. Private real estate can lose capital, may pay no distributions and is hard to sell. The client can ask to return to the default category.
This article is for general education and is not tax, legal or investment advice. Rules change and depend on individual circumstances. All investing involves risk, including loss of capital, illiquidity and currency movements. Offerings on Raveum are available to eligible investors only and are not open to the general public.
