Most of the talk in the financial services industry relating to 31/7/23 focuses on Consumer Duty and for good reason, because it will bring big changes for many firms, including a new addition to the FCA’s Principles for Businesses, says ATEB Consulting’s Paul Jay.
The new Principle 12 states:
“A firm must act to deliver good outcomes for retail customers.”
But what seems to be slipping under the radar a little is a new rule which also comes into effect on the same day.
All firms will be aware that SM&CR introduced the Conduct Rules – five affecting everyone and another four for those holding Senior Management Functions – but July 31 brings in a sixth Conduct Rule to coincide with the implementation of Consumer Duty.
On the face of it, Conduct Rule 6 is quite straightforward.
You must act to deliver good outcomes for retail customers.
But, as always, there’s a bit more to consider.
The new rules are enshrined within COCON 2.4 in the FCA Handbook and new obligations are as follows:
• You must act in good faith towards retail customers.
• Acting in good faith is a standard of conduct characterised by honesty, fair and open dealing and acting consistently with the reasonable expectations of retail customers.
• You must avoid causing foreseeable harm to retail customers.
• You must enable and support retail customersto pursue their financial objectives.
All straightforward then!
Firms will, of course, need to inform all staff affected by the new rule and update records appropriately.
This new rule clearly runs alongside Consumer Duty and aligns with FCA’s comments that they intend to make individuals responsible where failings are identified within firms, but it’s really what should be happening anyway.
Given that Principle 12 is being added to the existing set of Principles for Businesses, it probably follows that the Conduct Rules would be amended as well. Perhaps it’s overkill, but also a reminder that Consumer Duty and all that surrounds it really is a big deal to the FCA. Firms that think it isn’t are only fooling themselves.
