FCA Review Highlights How Firms Sell Complex ETPs to Retail Investors

The FCA has reviewed how firms market and sell complex exchange traded products (ETPs) to retail consumers, reinforcing the need for clear communication, strong controls and informed decision-making.

Complex ETPs form a small but higher-risk segment of the wider ETP market. These products often involve advanced investment strategies and structures that can be difficult for retail investors to fully understand, increasing the risk of harm if they are not sold appropriately.

As part of the review, the FCA assessed firms of different sizes and business models to understand how they evaluate complex ETPs, communicate key risks, and monitor customer outcomes under the Consumer Duty.

Why Strong Controls Matter

Given the complexity and risk profile of these products, it is essential that firms ensure retail investors have the knowledge and understanding required to make informed investment decisions.

The review found that some firms demonstrated strong and well-developed processes, including:

• Clearly defining appropriate target markets
• Assessing customer knowledge and investment experience
• Monitoring customer outcomes on an ongoing basis

However, the FCA also identified areas of concern. Some firms had weaker controls, limited assessments of customer knowledge, or unclear disclosures that made it harder for consumers to fully understand the risks involved.

Putting Consumers First

The FCA expects firms to prioritise consumer outcomes by ensuring products are suitable for their target market and that communications are clear, balanced and easy to understand. Transparent risk disclosure is essential to supporting confident and informed investment decisions.

What Firms Should Do Now

Firms offering complex ETPs should review their existing processes to ensure they fully meet Consumer Duty requirements. This includes:

• Addressing gaps in appropriateness and knowledge checks
• Improving how risks are explained to retail investors
• Strengthening monitoring of customer outcomes

This review forms part of the FCA’s broader work to protect consumers and promote a fair, transparent and thriving investment culture across the UK.

Understanding Complex ETPs

ETPs cover a wide range of investment products, from more straightforward options to high-risk offerings. One example is crypto exchange traded notes (cETNs), which are high-risk investments linked to cryptoassets.

Complex ETPs typically include leveraged and inverse strategies and often contain features that can be challenging for retail investors to understand. This includes the potential impact of holding products for longer than their recommended investment periods.

Firms may also find it helpful to review the FCA’s latest Policy Statement (PS25/22) and Discussion Paper (DP25/3), which aim to make investment products easier to understand and more accessible, while maintaining appropriate consumer protections.