In July 2018, the Financial Conduct Authority (FCA) issued a Discussion Paper regarding a proposal to impose a significant new obligation for authorised firms, namely that the regulatory system would emphasise that they had a ‘duty of care’ towards consumers. The regulator has now published a Feedback Statement summarising the responses to the Discussion Paper.

The FCA says that the respondents arguing in favour of a new duty of care made comments such as:

  • It could trigger a fundamental culture change within firms, requiring them to ask ‘is this right?’ rather than ‘is this within the rules?’
  • Firms would need to anticipate and evaluate harm at every stage of a consumer journey, and to take better preventative action
  • It should create clarity for consumers about what they can expect from firms
  • It could be a vital step in rebuilding consumer trust in financial services
  • It would allow the FCA take action where it identifies consumer harms that may not be captured by existing rules and principles

Opponents of the proposed duty of care said that:

  • The FCA should wait until the Senior Managers and Certification Regime has been introduced across the industry, and then it should consider whether this Regime has in fact already delivered the consumer protections the regulator is seeking
  • It could be difficult to consistently apply a single duty to the huge variety of firm/consumer relationships in financial services
  • It could lead to some duplication of existing obligations, creating confusion
  • It might lead to reduced access to financial services, and negative effects on innovation and competition, as firms would become excessively cautious
  • Some firms already adopt a stance of wilful non-compliance with FCA rules/principles, and respondents queried whether the introduction of a duty of care would have any greater deterrent effect for these firms
  • Real culture change can only come from within the firms themselves, and cannot be driven by a regulator
  • A duty of care already exists via Principle 2 (Due skill, care and diligence) and Principle 8 (Conflicts of interest)

For the time being, the obligations placed on firms remain unchanged – there is still much to be done before any new duty of care is introduced. The next step in the process will come in autumn 2019, when the FCA will publish a further paper seeking detailed views on specific options for change.

Andrew Bailey, Chief Executive of the FCA said:

”I am pleased that so many people shared their views with us as part of this process. Inevitably, there were a range of opinions about what would secure the right level of protection for consumers. Given their long-lasting impact, we now want to weigh-up possible changes, including whether reworking our Principles of Business is the right way forward. I will continue to push this forward as getting the right answer on this question is essential to the FCA delivering on its Mission.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article