Consumer Duty – further clarification

What are the latest updates?

Authorisations

From February 2023, firms applying to the FCA for authorisation will be required to prove that they can comply with the Consumer Duty. They will be expected to demonstrate compliance with the applicable requirements, which may include:

• Fair value assessment frameworks
• Outcome monitoring plans
• Distribution chain arrangements

The FCA may also request implementation plans and supporting materials from existing firms seeking to vary their permissions.

Information-sharing in the distribution chain

The FCA does not expect distributors to share information with manufacturers without being asked. The expectation is that manufacturers will assess what information would be relevant and take the appropriate steps to gather it.

Portfolio and sector letters

In early 2023, the FCA will publish a series of letters to portfolios and sectors setting out the FCA’s expectations for implementation. These letters will reflect the findings from the FCA’s review of firm implementation plans so far. Similar letters have already been published for high-cost lenders and financial advisers and intermediaries.

Application of the Duty to non-UK firms and customers

Only firms conducting regulated activities in the UK are subject to the Duty and this includes firms in Gibraltar selling products or services to UK retail customers. The Duty will apply to those firms whether they have an establishment in the UK or operate on a cross-border basis.

Where firms deal with non-UK customers, the Duty applies in line with the regulatory perimeter. This means that where existing rules apply to a UK firm dealing with non-UK customers, the Duty will also be applicable.

There may be cases where a distribution chain includes firms outside of the UK which are not subject to the Duty. The FCA has clarified it would not expect UK firms to obtain information from firms that are not subject to the Duty. Instead, UK firms should consider what is reasonable in the circumstances when gathering information to support their work.

Reference list

[1] - Consumer Duty - information for firms | FCA