The Financial Conduct Authority’s (FCA) deadline for comments on its retail conduct rules ends today (31 October), while experts warn about oversimplification.
On 29 July, the FCA launched a Call for Input, asking stakeholders to comment on its retail conduct rules and guidance. These guidelines aim to ensure that financial firms treat retail customers fairly.
In its announcement in July, the FCA wrote: “We want to see where we can simplify our retail conduct rules and guidance. We particularly want to address potential areas of complexity, duplication, confusion, or over-prescription, which create regulatory costs with limited or no consumer benefit. We also want to include appropriate flexibility in our rules to be responsive to future changes and innovation.”
However, Michael Shand, Managing Principal at consultancy Capco, has warned the UK Watchdog that oversimplifying rules could lead to ambiguity.
These retail conduct rules are a part of the FCA’s launch of its Consumer Duty, which was established to help achieve not only a high standard of care for customers but to allow for the international competitiveness of the UK economy and its growth in the medium to long term
The FCA’s announcement continued: “We want our approach to the Duty to support these aims by allowing for more effective competition and innovation. Consumers should have access to products and services suitable for their needs, and which provide fair value, appropriate communications and consumer support, while also improving trust in, and the reputation of, UK markets.”
Shand stressed the importance of this deadline, stating it is a significant step in “refining the FCA’s conduct rules and should be welcomed by the industry.”
“Rather than providing particularly detailed, prescriptive rules, Consumer Duty is centred on specific consumer outcomes. As a result, firms are required to interpret these outcomes and ensure – using data and evidence – that they are delivering against these consumer outcomes,” he added.
“The most mature firms will have already taken the opportunity to evolve into this way of working, streamlining their management and oversight of conduct. The review presents a limited opportunity for all firms and industry bodies to suggest specific areas for improvement.”
However, as mentioned above, Shand believes that the FCA should be cautious about the changes it makes.
He said: “The potential future benefits include a clearer focus on improving consumer outcomes and reduced costs. However, the FCA must be cautious: simplifying rules and relying too heavily on high-level guidance could lead to ambiguity, as firms might interpret their conduct obligations differently.
“Before removing too many rules, the FCA should assess firms’ maturity in embedding the Consumer Duty into their culture, recognising the many differences across firms and sectors.”
Notably, the FCA emphasised that this request for comment is specifically about its retail conduct rules and guidance and not about suggesting changes to the Duty.
