On 31 July 2023, the Financial Conduct Authority (FCA) introduced a new set of rules known as the Consumer Duty. Intended to set higher standards of consumer protection and relevant to financial services firms, the rules apply to all organisations with a key role in delivering retail customer outcomes, including those with no direct customer relationship. For example, it applies to firms that can determine or influence:
• the design or operation of retail products or services, including their price and value
• communications with retail customers
• customer support for retail customers.
Governance Oversight
The FCA has indicated that it expects firms to have a Consumer Duty champion at board level which should be an independent non-executive director, where possible. While not a ‘prescribed responsibility’ under the SM&CR, firms are encouraged to manage the responsibilities using their own judgement, maintaining oversight and challenging appropriately in a way that works within the existing roles of their organisation.
Application to Non-UK Firms
According to the FCA “only firms conducting regulated activities in the UK are within our regulatory remit and subject to the Duty.
Where the distribution chain involves firms in Gibraltar selling products or services to UK retail customers, the Duty still applies. It applies to those firms whether they have an establishment in the UK or operate on a cross-border basis.
We recognise that risks remain for UK retail customers if the distribution chain involves other parties outside the UK that are not subject to equivalent requirements. To help manage this risk, UK distributors of non-UK products and services must take all reasonable steps to understand the product or service, the target market it would serve and the value it provides so that it will be distributed appropriately.
Regulated firms should also consider whether including a firm that is not subject to the Duty in the distribution chain leads to a risk of poor customer outcomes.
The Duty’s focus is to ensure that financial firms put the customer at the heart of what they do. Knowing that the financial services always involve some consumer risk, the FCA will be seeking a clear articulation of how a firm will be affected by the Duty, and how it will act to provide good outcomes to those consumers.