The FCA has published the second edition of its Enforcement Watch newsletter, providing firms with valuable insight into how it is approaching supervision and enforcement under the Consumer Duty. Whilst the regulator has spent the past three years supporting firms with implementation, the message is now clear: the FCA expects firms to demonstrate that the Duty is embedded in practice, with robust governance, evidence of good consumer outcomes and timely action where harm is identified.
From implementation to accountability
The Consumer Duty came into force in July 2023 for open products and services, with firms given time to adapt their frameworks, governance and product oversight arrangements. The FCA recognises that implementation required significant effort across the industry. However, it now considers that firms have had sufficient time to embed the Duty into their day-to-day operations. As a result, supervisory engagement is increasingly being supported by enforcement activity where the FCA believes firms have failed to meet the required standards. The regulator makes clear that enforcement is intended not only to address serious misconduct, but also to reinforce the importance of delivering good consumer outcomes across the market.
Eleven live Consumer Duty investigations
One of the most notable updates is the increase in the number of live Consumer Duty investigations. The first edition of Enforcement Watch referred to six investigations. The latest edition confirms that this has now increased to 11 ongoing investigations, demonstrating that Consumer Duty is becoming an established area of FCA enforcement activity.
Importantly, the FCA explains that these investigations are not limited to one aspect of the Duty. Instead, they span a range of potential failings, including:
- failures to identify and prevent foreseeable consumer harm;
- weaknesses in governance and oversight;
- poor product design or distribution arrangements;
- inadequate monitoring of customer outcomes; and
- failures to act promptly when firms become aware of emerging issues.
Supervision and enforcement work together
A key theme running throughout the newsletter is that supervision and enforcement should not be viewed as separate regulatory functions.
The FCA explains that supervisory work often identifies concerns which may later develop into enforcement investigations where firms fail to address deficiencies. Equally, supervisory interventions may be used alongside enforcement to reduce ongoing consumer harm before any formal outcome is reached. This reinforces the importance of responding promptly and effectively when the FCA raises concerns. Waiting until an issue becomes the subject of enforcement action is unlikely to be viewed favourably.
Evidence matters
Perhaps the strongest practical message for firms is the FCA’s continued emphasis on evidence. It is no longer sufficient to state that Consumer Duty has been implemented. Firms should be able to demonstrate, through documented evidence, that they understand how their products and services are performing, that they monitor customer outcomes and that governance arrangements enable issues to be identified and addressed.
Examples of evidence may include:
- meaningful Management Information (MI);
- documented Consumer Duty Board reporting;
- product and fair value assessments;
- customer outcome testing;
- vulnerability monitoring;
- complaints analysis;
- root cause reviews; and
- records showing decisions and remedial actions taken where poor outcomes have been identified.
Prevention remains the FCA’s priority
The newsletter reinforces that the FCA’s objective is not simply to take enforcement action after harm has occurred. Instead, firms are expected to identify risks early, intervene proactively and demonstrate that they have taken reasonable steps to prevent foreseeable harm. This reflects the broader philosophy underpinning the Consumer Duty: firms should continually assess whether they are delivering good outcomes rather than treating compliance as a one-off implementation exercise.
What firms should be doing now
Enforcement Watch 2 serves as a timely reminder that Consumer Duty is now firmly moving into its maturity phase. Firms should consider whether their existing frameworks remain fit for purpose and whether they can evidence effective oversight if challenged by the regulator.
Areas that may warrant particular attention include:
- reviewing Consumer Duty governance and Board reporting;
- assessing whether MI genuinely demonstrates customer outcomes;
- testing product governance and fair value assessments;
- ensuring vulnerability frameworks remain effective; and
- confirming that issues identified through monitoring are tracked, escalated and resolved in a timely manner.
How Complyport can help?
- Consumer Duty health checks and gap analyses: to assess governance, MI, product oversight and evidence against FCA expectations.
- Board and governance support: including reviews of Consumer Duty reporting, fair value assessments and outcome monitoring frameworks.
- Independent compliance assurance and monitoring: helping firms identify weaknesses early and evidence effective oversight before regulatory concerns arise.
Contact Us
To discuss how the FCA’s proposals may impact your business, speak to one of our experts.
Alternatively, explore our Virtual Compliance Assistant: https://vica.chat
