The FCA To Introduce A New Principle & Code Of Conduct Rule
What has happened?
On 31st July 2023, the FCA will implement the Consumer Duty, which is intended to fundamentally improve how firms serve their retail customers. It will set higher and clearer standards of consumer protection across financial services and will require firms to put their retail customers’ needs first.
What are the key developments?
As part of the implementation of the Duty, the FCA will introduce a new Consumer Principle (Principle 12), requiring firms to act to deliver good outcomes for retail customers, and replacing the existing Principles 6 and 7 where Principle 12 applies.
Principle 12 is intended to impose a higher and more exacting standard of conduct than Principles 6 and 7. What is required to deliver good outcomes is explained by the cross‑cutting outcomes rules and is supported by the FCA's guidance.
In addition, the Duty will introduce the related Code of Conduct Individual Rule 6, requiring conduct rules staff (that is, all staff working within firms, with a small number of exceptions) to act to deliver good outcomes for retail customers.
What does this mean for firms?
Firms will now need to make sure that they regularly review and monitor the outcomes that their retail customers are experiencing. This is extended to products and services being regularly reviewed and monitored to ensure they are delivering on the expected Duty outcomes, and firms are expected to be able to identify where they are responsible for poor outcomes or harm, understanding the root causes for both.
There is an expectation that firms will identify sources of data to enable them to assess whether the outcomes that their retail customers are experiencing are consistent with the Duty’s expectations and to produce and regularly review relevant MI.
In terms of data and MI, the FCA has in its finalised guidance given firms further information on the types of data they can use (i.e. for the price and values outcome, profitability data, surveys, customer complaints, and root cause analysis) and it has confirmed that it will measure the success of the Duty by monitoring key outcomes for consumers.
Firms will now need to expand their compliance monitoring programmes to include compliance with Principle 12 and Rule 6, and their staff training on the Code of Conduct will need to cover these considerations also. Firms will need to ensure that they have their own clear MI and data to demonstrate their success in achieving the outcomes.
How can we help you?
Thistle Initiatives has supported firms for over 10 years as a trusted compliance and regulatory advisor. In addition to assisting you as-and-when, its team of specialists can serve as your right hand in meeting and complying with regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.
Are you looking for help with your Consumer Duty arrangements, implementation support, framework review or ongoing support? Contact its specialist team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to info@thistleinitiatives.co.uk.