The FCA has updated its’ general information page related to the implementation of Consumer Duty compliance processes. Consumer Duty PS22/9 final rules and guidance were published last July 2022 and are intended to set higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first.
Our past article explained the rules and guidance found in PRIN 2A.4 Consumer Duty: retail customer outcome on Price and Value.
The recent updates were posted as a response to queries received from firms and are meant to assist firms in applying and implementing its’ Consumer Duty. A summary of the updates may be found below:
- Expectations for Outcome Monitoring from the FCA: Firms are expected to monitor customer outcomes and to understand whether they are meeting the Duty’s requirements. Firms are advised to commence the monitoring process and to be ready for the requirement when the formal implementation deadline is reached (July 2023).
- Consumer Duty Board Champions: The FCA expects this function to work alongside the CEO and Chair of the firm, where in some cases it highlights that the Chair may be the most appropriate Champion.
- Closed Products Definition: The FCA has confirmed that the term “closed” should be used for products that have customers paying into them but are not open to new customers.
- Retrospective Application: The FCA and FOS are collaborating in ensuring the interpretations of the expected standards are consistent to avoid the application of Consumer Duty standards into matters that happened before it comes into effect.
- Proportionality: The FCA notes that the Duty applies in a reasonable manner, which means that some firms will have to accomplish more than others in specific areas.
- Requirements for Firms Seeking Authorisation: The FCA highlights that from February 2023 all firms applying for authorisation will have to demonstrate that they comply with the Duty, and firms seeking to vary their permissions will be requested to provide a copy of their implementation plan and additional evidence that supports it.
- Portfolio and Sector Communications: Letters will be sent out in early 2023 by the FCA, which will set out its sector and portfolio-specific expectations.
- Application of the Duty to Distribution Chain Firms: The FCA confirmed that firms with no direct customer relationships will have to comply with the Duty provided they have a key role in delivering retail customer outcomes.
- Information Sharing in the Distribution Chain: The FCA stated that it does not expect distributors to share information unless requested. This is despite the fact of manufacturers’ and distributors’ need for collaboration in sharing information. Additionally, the FCA notes that it expects firms to raise any concerns they have with respect to another firm or parties in the distribution chain that may not be complying with the Duty.
- Non-UK Firms Application of the Duty: With the Duty only being applied to firms providing services and selling products in the UK, the FCA highlights that a firm within or outside the UK should take all reasonable steps to understand and take into consideration the effects of poor consumer outcomes even if it is not subject to the Duty.
- Non-UK Customers Application of the Duty: The FCA notes that as a rule of thumb, if current rules apply to non-UK customers, so will the Duty.
- Clarifying the Scope: The FCA described its ongoing consultation on changes that will clarify certain elements of the application, for example, application to firms approving and communicating financial promotions.
The FCA consultations, guidance and updates are intended to provide clarification to firms on the application and implementation of the Consumer Duty.
During their latest “Inside FCA” podcast, they interview Consumer Duty expert Ozge Ibrahim and discussed the importance of new rules and how firms can best prepare to implement Consumer Duty for both new and existing products in July 2023.
As mentioned above, the FCA package of portfolio and sector-specific letters commenced with wholesale broker firms on the 11th of January and the rest to be sent out early 2023. These will set out expectations for implementation and findings from the FCA’s review of firms’ implementation plans.
How can Complyport help?
If you have any questions about the upcoming changes in the financial promotion rules and Consumer Duty, or you think your firm may require assistance, please contact Jan Hagen via email at jan.hagen@complyport.co.uk to book in a free consultation or to sign up and register for our Financial Promotions Webinar on February 1st.
About Complyport
Complyport is on the FCA’s Skilled Panel list and is a market leading consulting firm supporting the UK financial services industry for over 20 years.
We specialise in supporting the UK financial services industry with compliance guidance, advice and best practice.
- Financial Promotions guidance, support, and management software solutions
- Prudential support, IFPR, ICARA and financial resilience advice
- Operational resilience & Cybersecurity advice
- CASS advice and protections of client assets
- Comprehensive compliance work-flow management software
- Compliance managed services and resourcing compliance personnel
- Financial Crime and Forensics
- Consumer Duty implementation advice
- Skilled Person Reviews and Regulatory Investigation
Contact our Head of Regulatory Business Solutions, Jan Hagen via email at: jan.hagen@complyport.co.uk to book a free consultation.
