Britain’s Financial Conduct Authority (FCA) was advised on Monday to consider bringing large language models into its regulatory scope, according to a review published by the FCA’s executive director, Sheldon Mills. The recommendation arises amid rising use of conversational AI in consumer financial decision-making.
The review highlights that more than 25% of UK consumers place trust in tools such as OpenAI’s ChatGPT, Anthropic’s Claude and Google’s Gemini for financial advice. It also notes that most users do not realize that the consumer protections that attach to regulated financial services are not applicable to these AI-driven tools.
In the UK, providing financial advice is a regulated activity limited to authorized firms. Mills’ review says AI systems should restrict themselves to generic financial guidance rather than personalised recommendations. The report raises concern that tailored recommendations supplied by chatbots could blur the line between generic guidance and regulated advice, and that continuously adaptive outputs from these systems may increasingly resemble the latter.
Mills recommended that the FCA carry out a review within three to six months to determine whether to recalibrate the regulatory perimeter. That review should assess the scale, nature and impact of AI models that currently sit outside the FCA’s remit.
The document also flagged system-wide vulnerabilities created by firms’ reliance on a limited set of technology providers. That concentration could amplify cyber and operational exposures tied to advanced AI models.
Regulators internationally have sharpened their attention on the risks posed by frontier AI models and agentic systems. The review cites concerns ranging from cyber and operational risks associated with frontier models such as Anthropic’s Mythos to the challenges presented by agentic systems that can perform actions with minimal human oversight.
Context and implications
- The review connects growing consumer use of chatbots for finance with a potential need to redefine what constitutes regulated financial advice.
- It identifies concentration risk in technology supply as a source of system-wide vulnerability for firms that depend on a small number of providers.
- The FCA has been asked to report back within a three- to six-month window on whether the regulatory perimeter should change.