The FCA has published its Feedback Statement on its ‘A duty of care and potential alternative approaches’ Discussion Paper which summarises the feedback from respondents and sets out how the FCA plans to deal with the issues the discussion raised.
The feedback can broadly be summarised as follows:
- The case for change – Most respondents consider that levels of harm to consumers are high and there needs to be change to better protect them.
- A New Duty – Some stakeholders suggested setting a new definition of the standard of conduct firms owe to consumers, to improve consumer protection. This could be either as a statutory duty or as a duty expressed within the Principles. While others think SM&CR is already bringing about the change needed and that the FCA should wait until it can evaluate its impact before assessing whether a new Duty is needed.
- Utilisation of the existing regulatory framework – Although stakeholders calling for change disagree about whether a New Duty is needed, most feel that the FCA should consider changes to the way it uses the existing regulatory framework. Suggestions included applying the Principles more broadly by acting more readily (particularly in respect of the FCA’s supervisory function) and being more transparent about what standards for good customer treatment are and how it acts to secure these.
- Culture change – A number of stakeholders noted that real change to consumer outcomes can only come from fundamental cultural change within firms – of a kind that cannot be driven by external force, such as regulatory intervention or a legislative duty. They argue that the will to change must come from firms themselves and must begin at the top of the management structure.
In light of the feedback, the FCA has said its primary focus will be on:
- reviewing how it applies the regulatory framework – particularly in relation to the Principles and how it communicates with firms about this; and
- new/revised Principles to strengthen and clarify firms’ duties to consumers, including consideration of the potential merits and unintended consequences of a potential private right of action for Principles breaches.