FCA creates dedicated ‘neo-brokerʼ supervision team

The UK Financial Conduct Authority (FCA) is creating a separate team to supervise firms that are classified as “neo-brokers” under its new working definition, according to a Freedom of Information Act (FoIA) response (FOI12296).

The FCA confirmed it was “supervising firms meeting the definition under one team going forward”, following its scrutiny of neo-brokersʼ game-like features — which are designed to appeal to younger customers — alongside compliance weaknesses spotted by the International Organization of Securities Commissions (IOSCO).

The working definition came into effect on April 15, 2025. The FCA says it covers all firms “providing retail customers [with] a digital platform that offers commission-free or low-cost execution-only trading of financial instruments like equities, fractional shares and exchange-traded funds (ETFs)”.

“Other services may also include securities lending or margin lending, as well as access to high-risk products like contracts for difference (CFDs), cryptos and options,” it adds.

Using the FCA’s working definition, Compliance Corylated found that all five major UK-based trading applications (see graphic) are classified as neo-brokers, as they offer stocks and ETFs, and are advertised as “commission-free” platforms.

Many platforms also offer cryptocurrencies — even though these are only partially regulated by the FCA.

Same service, same permission

The FCA also noted that neo-brokers will still hold the “same permissions” as other conventional “consumer investment firms” and will not be subject to any “separate permissions”. For example, the Financial Services and Markets Act 2000 (FSMA) outlined specific regulated activities for consumer investment firms, such as dealing in investments, deposit taking, safeguarding and administering assets, managing investments and giving investment advice.

The UK watchdog also highlighted that the term “retail broker” itself also covers a wide range of financial institutions, including independent financial advisers (IFAs), wealth managers, stockbrokers, neo-brokers and investment platforms.

Evolving business model

“They [neo-brokers] typically interact with retail clients through a user-friendly app that gives easy access to markets and allows trading in low minimum investment values,” the FCA added.

The approach aligns with Robinhood’s launch of stock tokens last week and plans to tokenise other “real-world assets” in the future.

We previously asked the regulator for a list of neo-brokers, but in its reply the FCA said the business model is constantly “evolving” and therefore it “does not hold a readily accessible list of firms”.