The UK Financial Conduct Authority has proposed a new Consumer Duty, which will put in place a higher level of protection in retail financial markets.
According to the FCA’s 2020 Financial Lives Survey, 1 in 4 participants lack confidence in the financial service industry and just 35% of them think that firms have transparent practices. The regulator noted that it has seen evidence of firms providing information presented to customers in a misleading or difficult to understand way.
As a response, the UK watchdog has proposed extending rules and principles to ensure firms provide a higher level of consumer protection consistently allowing consumers to have good outcomes from participation in the financial markets.
The new Duty is meant to ensure consumers “always get products and services that are fit for purpose, that represent fair value and are clearly communicated and understandable,” the official announcement said. The new regulation aims to help consumers make good choices and have confidence in the customer service they receive.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, commented:
The package of measures we are proposing will enhance our existing rules and is designed to tackle the harms we see in financial services markets, and their causes, as well as put consumers in a stronger position to make good decisions.
We want firms to be putting themselves in the shoes of consumers and asking ‘would I be happy to be treated in the way I treat my customers?’. We want consumers to be able to advance their financial wellbeing and build positive futures for themselves and their families.
The Consumer Duty will have 3 essential elements:
The Consumer Principle, reflecting the general standards of behaviour the FCA expects from firms. The proposed wording right now is: ‘a firm must act in the best interests of retail clients’ or ‘a firm must act to deliver good outcomes for retail clients’.
Cross-cutting rules will require 3 key behaviours from firms, including taking steps to avoid foreseeable harm to customers, to enable them to pursue their financial objectives and to act in good faith.
A suite of rules and guidance will set more detailed expectations for firm conduct in 4 specific areas – communications, products and services, customer service and price and value.
The proposed rules will be open for consultation until 31 July 2021 then the FCA is expected to consult again on the suggested change by the end of the year and make any new rules by the end of July next year.
The FCA recently said it was considering removing MiFID regulations on research for firms with a market up that falls under £200 million. This upcoming decision is one of a few new proposals being collated to reduce the burden placed upon small investment firms at this time, and to improve the competitive market for UK financial companies.
Earlier in April, the UK regulator released a new policy statement on its website announcing that all UK crypto firms must now submit financial crime reports on a yearly basis, regardless of annual revenue. Within the new financial crimes reporting sphere are cryptoasset business, following plans released eight months ago alluding to the policy change.
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.