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The FCA asks for feedback on its Quarterly Consultation Paper

Have Your Say in AML/CTF Supervision Reform
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The FCA held discussions with regulated firms across different industries since they published the final Consumer Duty rules in July 2022. The watchdog identified a few areas where clarification was needed on how the Duty applies on which they consulted in the December 2022 Quarterly Consultation Paper (QCP) to make certain points clearer in the rules.   The FCA wanted to know what regulated firms thought of their proposals, giving firms a deadline of 9 January 2023 to provide feedback for chapters 2, 3, 4, 5, 6, 7 and 8.

The clarifications in Chapter 8 of the QCP, summarised below, are consistent with our position in Paper CP21/36.

  • Firms approving and communicating financial promotions
    Authorised firms approving financial promotions on behalf of unauthorised third parties, or communicating promotions, will be subject to the Consumer Duty and would need to consider the Consumer Principle, cross-cutting rules, the consumer understanding outcome, rules on monitoring and governance, and supporting provisions (such as those relating to reasonableness and redress).
  • Firms in the Temporary Marketing Permissions Regime (TMPR)
    The TMPR allows EEA fund managers to continue selling their funds into the UK now we are no longer a member of the EU single market. We have been asked how the Duty applies to firms within this regime. The firms will need to consider the Duty with regard to the approval and promotion of financial promotions.
  • Defined benefit occupational pension schemes
    The Duty applies to FCA authorised firms creating a product or operating pension schemes for occupational pension scheme trustees, to the extent the firms can determine or materially influence retail customer outcomes. It applies in this way both where the scheme is a defined contribution occupational scheme or a defined benefit occupational scheme.
    In practice, we do not expect there to be many instances where FCA authorised firms have a material influence on retail customer outcomes in relation to defined benefit schemes. It is possible, however. For example, a firm might provide services to trustees that have a material influence on consumer understanding or consumer support. The Duty would be relevant in such cases.
  • Closed products
    Products and services are classed as closed where they are not being marketed or sold to new customers, and are not available for renewal by existing customers. In relation to an occupational pension scheme, the product would be considered to be closed where it is no longer possible for new members to join the scheme.
  • Non-retail financial instruments
    There is an exclusion from the Duty for firms conducting activities in relation to non-retail financial instruments. This exclusion is intended to be used by firms conducting wholesale activity. However, the current wording might be incorrectly interpreted as also excluding certain retail activity, such as an adviser recommending a financial instrument with a high minimum investment amount.
  • Exemptions in sectoral Sourcebooks
    The Duty does not apply to activities where an exclusion exists in our sectoral rules. As an example, regulated buy-to-let mortgages are subject only to rules on financial promotion in the Mortgage Conduct of Business (MCOB) sourcebook and only relevant aspects of the Duty – in relation to communications – would apply.

How we can help

If you’d like to know more about how we can assist you with implementation of the Consumer Duty or how we can support you with authorisation arrangements, or any other regulatory compliance matters, please contact our specialist team here.

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