FCA has updated its general information page for firms on the Consumer Duty. The page sets out brief guidance on:
- FCA’s expectations for outcome monitoring: FCA notes that without appropriate monitoring of outcomes customers are receiving firms will not be able to tell whether they are meeting the Duty’s requirements. It recommends firms start monitoring before the implementation deadline to check they are ready for when the requirement kicks in;
- Consumer Duty Board champions: FCA explains how the function should act alongside, specifically, the CEO and the Chair, but acknowledges that in some firms it may be appropriate for the Chair also to be the champion;
- Definition of closed products: FCA has confirmed that products will be “closed” if customers are still paying into them, so long as they are not open to new customers;
- Retrospective application: FCA says that it and FOS are working to ensure their interpretations of expected standards are consistent, and will not apply Consumer Duty standards to things that happened before it takes effect;
- Proportionality: FCA says the Duty applies in a “reasonable” way, so naturally some firms will need to do more than others and in specific areas;
- Requirements for firms seeking authorisation: FCA confirmed that all firms applying from February 2023 will have to prove they can comply with the Duty and firms looking to vary their permissions will be asked to supply a copy of their implementation plan and supporting evidence;
- Portfolio and sector communications: FCA will be sending letters out in early 2023 setting out its sector and portfolio-specific expectations;
- How the Duty applies to firms throughout the distribution chain: FCA confirms the Duty applies even for firms with no direct customer relationship, provided their actions have a key role in delivering retail customer outcomes;
- Information sharing in the distribution chain: FCA says that while manufacturers and distributors will need to work together and share information, it does not expect distributors to share information unless asked. It also notes that, while firms are responsible only for their own activities, they should raise any concerns about other parties with that party and also notify FCA if they consider another firm in the distribution chain may not be complying with the Duty;
- Application to non-UK firms: While the Duty only applies to firms conducting regulated activities in the UK, it does apply to Gibraltar firms selling products or services to UK customers, whether from within the UK or not, and where a UK distributor is distributing a non-UK product, it should take all reasonable steps to understand it and to consider whether including a firm that is not subject to the Duty might lead to a risk of poor consumer outcomes;
- Application to non-UK customers: as a rule of thumb, if current rules apply to non-UK customers, so will the Duty; and
- Clarifying the scope: FCA has noted its ongoing consultation on changes that will make certain elements of application clearer, such as the application to firms approving and communicating financial promotions.