The FCA is consulting on plans to simplify its rules more for wholesale businesses involved in retail markets. It plans to:
- remove all business for “genuinely” non-UK customers from the scope of the Consumer Duty – on the proviso that there is no clear link with the UK and no reasonable expectation of UK regulatory protection. Essentially, this means it will apply to retail market business only where the retail customer is usually resident in the UK;
- set clearer boundaries so firms have certainty on what is outside the Duty’s scope; and
- give more clarity on what firms are responsible for when they work together. In this respect, the FCA appreciates that sometimes products will be available to both UK and non-UK residents and that depending on a firm’s position in the distribution chain it may find it more or less difficult to identify where the end retail customer will be. So the proposal is that if manufacturers are designing products intended only for distribution outside the UK they must reflect this in distribution strategies, while distributors are expected to know whether the end customer is UK resident on the basis of their given address.
The proposals follow the FCA’s 4 point plan it sent to the Chancellor last September as part of its Mansion House commitments.
The FCA says its proposals are designed not only to bring greater clarity but also to address concerns that firms are applying the Duty in areas where it was not designed to apply.
The consultation is accompanied by another consultation on changes to the ICOBS and PROD rules for non-investment insurance products, consistent with the main proposals, but in this case the Duty would apply where either the customer is habitually resident in the UK or the insured risk is in the UK.
There are also exceptions to the proposals, including:
- that the military and civil servants posted overseas and their families would have the Duty’s protection if they have a British Forces Post Office address;
- that the Duty should also still apply to sales of pre-paid UK funeral plans to customers living outside the UK, or where firms provide advice or arrange transactions relating to UK pensions to customers not usually resident in the UK.
The consultation includes several examples of how the FCA expects various participants in distribution chains to act in relation to the Duty and its application.
The insurance consultation also includes further simplification proposals, such as removing some disclosure requirements that are duplicative or unnecessary and simplifying rules for advised sales.
The main consultation closes on 18 September, and the FCA expects to make new rules in Q1 2027, but the insurance simplification consultation closes earlier, on 4 September.