Emma RadmoreThe second edition of FCA’s Enforcement Watch looks at its approach to supervising and enforcing the Consumer Duty.
The FCA recognised that firms needed time to embed the Duty, and now, three years in, it has 11 investigations into potential breach, having opened its first one in August 2024.
It expects firms continually to challenge whether their actions are compatible with the Duty and will take action if it does not see that happening. It has in fact intervened 382 times, and almost always the issue has been resolved without enforcement action.
Interventions have included where the FCA saw the need to address issues such as:
- insurer valuation of vehicles;
- failure of an advisory firm to consider conflicts;
- general concerns about acting in good faith towards retail customer;
- not properly considering a firm’s influence on retail customer outcomes in the distribution chain; and
- its publicised actions against CMCs.
Several interventions have resulted in the relevant firm agreeing a VREQ. Where the FCA has gone further, it is often looking at whether customer received fair value, but is also considering other cases, such as whether the product was designed with its target market in mind and whether its features are clear.
The open investigations relate to a range of firms, including:
- a wealth management firm, where the FCA is particularly looking at financial promotions, high fees and engagement with the regulator;
- a P2P lending platform and the clarity of its communications;
- a small IFA in relation to lack of fair value assessments;
- operational and oversight failings in insurers;
- shortcomings in claims and complaints handling also in the insurance sector; and
- in one case, an insurance firm “hollowing out” a product – this one may eventually lead to a public outcome.