Devlin Mambo consider our 5 key takeaways

The FCA Consumer Duty final Rules

The FCA’s Consumer Duty has been widely anticipated by the industry; it was positive, then, that the 27^th of July saw the release of the final Rules. As a reminder, the Consumer Duty aims to set higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first.

So, what are our 5 key takeaways:

1. Theme

There was a general feeling that the FCA was listening to the industry, prior to the release of the Rules. It was positive, then, to see that the FCA did scale back its expectations following industry concerns raised on the back of CP21/36. We were pleased to see that firms will not be required to go beyond what could reasonably be expected when complying with the Duty. There is neither the requirement to extend past a firm’s permissions, nor to become accountable for other firms’ actions, where they have no accountability.

2. Implementation

Whilst it seems like the FCA are providing an extended implementation timeline to July 2023 from April 2023, there are subtleties within the Rules that need to be considered carefully. The first deliverable is, in fact, expected by the end of October 2022 and a key deliverable for product manufacturers by the end of April 2023.

Key dates for the diary

31^st October 2022: Boards are expected to have agreed on an implementation plan, demonstrating challenge on the plans to ensure they are deliverable.

28^th April 2023 – July 2023: A review of the 4 outcomes by manufacturers, and how these will be met, is required for all existing products by the end of April 2023. The process should identify those changes required and that firms should remedy by July 2023.

3. Equivalence

The FCA has confirmed equivalence between the FCA COLL Rules (for value assessments) and FCA PROD guidance (for product governance Rules) and the Duty, provided firms wish to rely on this. The FCA PROD and COLL Rules will align to the ‘products & services’ and ‘price and value’ outcomes under the Duty. This means that firms will no longer have to consider additional requirements of the Duty if they can evidence adherence to the FCA PROD and COLL Rules.

4. Governance

The Consumer Duty will now need to form a part of firms’ strategies, governance, leadership, and people policies in a push to increase accountability and oversight. Under SMCR, Senior Managers will be accountable for delivering good consumer outcomes. The FCA expect firms to appoint an independent Non-Executive Director (NED) as a ‘champion’, and sitting at Board level, who will help the Chair and CEO ensure the Duty is discussed regularly and considered within discussions. The board should sign off on a report that assesses whether good outcomes have been delivered to consumers on an annual basis (required by July 2024).

Note: there is a list of questions the Champion/ firm should consider (FG22/5 6.80).

5. Distribution chain

The FCA have provided examples of what ‘material influence’ could look like to help define the scope. The main takeaway is that firms that could determine or materially influence any of the four outcomes – this includes product design, branding, or promotion – would be caught. The Rules will be applied proportionately, with a firm’s proximity to the end client taken into consideration in relation to how much they can influence. This is especially useful when considering the multiple layers of intermediated distribution in the UK. There is now a requirement to notify the FCA when a firm identifies where another firm in the chain is not, or may not be, applying the Consumer Duty.

Devlin Mambo have been closely tracking the FCA Consumer Duty since first mooted, as a concept, within the FCA Discussion Paper 18/5.

To discuss how Devlin Mambo can help you and your firm with the implementation of the Duty, please don’t hesitate to get in touch with a member of the team.

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